Under the Patient Protection and Affordable Care Act (PPACA), a seasonal employee is defined as someone who works 120 days per year or less for an employer. Various types of seasonal workers can include restaurant staff, lifeguards, or theme park workers.
If you are a seasonal employee and have bad credit, getting approved for auto financing can be very difficult. In fact, your success will largely depend on your income and the stability of your job.
Auto loan requirements for seasonal employees with bad credit
Normally bad credit auto loan applicants must meet minimum income requirements. This is because while special lenders may work with buyers who have credit problems, they must ensure that those buyers have the means to repay the loan.
Usually, bad credit lenders require applicants to provide proof that they are earning at least $ 1,800 per month (before tax). Ideally, this income should come from a regular employer. And the longer the buyer has been in the same position, the better their chances of being approved.
This is why seasonal employment associated with bad credit can make someone a tough sell for a lender. First, there is the question of income. Typically, when making an approval decision, special lenders only consider one source of income. So even if someone has two or three seasonal jobs, only the first will count.
This means that the car buyer will need to earn an annual employment income of at least $ 21,600 (before tax). Of course, that’s $ 1,800 times 12, or what they would earn annually if they met the minimum monthly requirements.
Second, the issue of job stability needs to be addressed. This is why a seasonal employee who needs a bad credit car loan will have to prove that their job has been stable. In order to verify that they can count on their income, they will likely have to provide several years of tax returns. In addition to this, they may also need to produce bank statements for those years.
Seasonal employment and unemployment benefits
Many seasonal workers depend on income from unemployment benefits for several months of the year. And although they may suggest that this income will count towards a minimum income requirement set by a lender, it does not.
Income from unemployment benefits will also not be factored into a person’s debt-to-income ratio (DTI) or payment to income ratio (PTI). So even if an applicant is able to cover all annual bills and expenses with a combination of salary and unemployment, they may still not be eligible for a bad credit car loan. Indeed, only earned income will be taken into account when calculating these ratios.
Alternative loan options for seasonal employees
If a seasonal employee with bad credit earns enough income to qualify for a loan, but still has employment stability issues, a strong co-signer can help. This co-signer should be someone with good credit and a stable, non-seasonal job. Of course, this is an arrangement that must be made with caution. After all, being a co-signer comes with many risks.
Finally, if there is no other option available, a person in credit difficulty with a seasonal job may be able to finance a car through a dealer buy-here-pay-here (BHPH). These types of dealers manage their financing in-house. This means that they don’t use third-party lenders, and they don’t normally perform credit checks on buyers.
As long as someone can prove that they can make weekly or bi-weekly payments, they should be able to get approval for a BHPH lot. However, buyers of BHPH should be warned that they will likely face a high interest rate on their loan. Additionally, if possible, they should find a BHPH dealer who reports both loans and payments to the credit bureaus. In this way, the buyer will have the opportunity to improve their credit by making all of their payments on time.
Financing assistance for difficult credit situations
Even if you think there is no way to get auto financing, Auto Express Credit may be able to help. We can put you in touch with a local dealer that can work with unique credit situations. So even if you think you have no options, you might be surprised.
To make your job even easier, our service is free and without obligation. Therefore, you really have nothing to lose. Go ahead and complete our simple and secure auto loan application to start today.