Auto Loan Based On Income & Monthly Payment, Not Credit

If you want an auto loan without a credit check, you must counterbalance your application with positive elements and accept higher borrowing costs.  

You must be solid on income, employment, and the projected monthly payment relative to your earnings if you want the lender to ignore a crucial underwriting tool (credit report and scores).

Lenders calculate a Debt-to-Income (DTI) ratio to measure your ability to afford the additional installments. In other words, you must keep the DTI very low to qualify.

You can minimize DTI by making a significant deposit, extending terms, and selecting a lower-priced vehicle.

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Based On Monthly Payment

Auto finance companies base their loan approvals on the monthly payments for the vehicle and other obligations. If you want the lender to disregard your credit score, showing that you can afford the car balances your application with positive elements. 

Down Payment

Finance companies will most likely approve a car loan request based on the projected monthly payment instead of credit when the applicant makes a significant deposit.

Personal loans based on income and employment utilize similar underwriting guidelines but do not require collateral, possibly allowing you to raise money for a substantial down payment.

A considerable deposit (20% or more) reduces the amount financed, lowering the monthly installment. Plus, it lowers your default risk, as lenders know you are more likely to stay current when you have positive equity in the vehicle.

Other Payments

Lenders are more likely to approve auto loans based on the monthly payment rather than credit score when you can afford all obligations, not just the financing for your next vehicle.

All finance companies calculate a total debt-to-income ratio as an underwriting tool when making lending decisions.

DTI = monthly debt service/monthly income

The debt-to-income for a car loan needs to be as low as possible. The ratio includes the projected monthly payment for the vehicle you are about to purchase plus all other obligations.

  • Housing (mortgage or rent)
  • Credit cards
  • Personal loans
  • Medical debt

Car Payment

Drivers are more likely to get approved for an auto loan based on the monthly payment when the specific periodic installment is as low as possible. When asking the lender to ignore your credit score, you must show you can afford the vehicle.

Bad credit loans with low monthly payments keep the financed amount small while extending the repayment terms.

Lower Prices

You can reduce the amount financed to lower monthly payments in two ways.

  1. Choose a low-priced vehicle
    1. Economy vs. luxury
    1. Used vs. new
  2. Make a significant down payment

Longer Terms

Extending the terms also lowers the monthly payments but increases the financing costs because interest has more time to accrue. For instance, consider these figures for a $30,000 vehicle at a 10% interest rate.

TermMonthly PaymentTotal Interest
2 Years$1,384$3,224
4 Years$760$6,522
6 Years$556$10,015

Based On Income, Not Credit

Lenders sometimes approve auto loans based on income instead of credit when you can verify employment and your earnings are high enough to lower the DTI sufficiently. Still, this avenue comes at a cost.  

No Credit

Income-based auto loans have higher borrowing costs as lenders charge higher interest rates and origination fees when ignoring credit scores (FICO® or Vantage®). Plus, borrowers need to extend terms, giving the interest more time to accrue.

However, this avenue can still make sense for people with negative histories and young adults yet to establish themselves.  

No History

Drivers might also seek auto loans based on income rather than credit score because they have yet to establish a consumer report. You need at least six months of history before the equations will output a number.

Car loans for eighteen-year-olds with no credit history are more achievable when you establish that you are gainfully employed and earning enough money to handle the monthly payment.

Lenders must approve first-time car buyers at some point. Otherwise, nobody can borrow money and establish their credit report. Because finance companies can repossess your vehicle in the event of default, auto loans are likelier to be the earliest trade lines.

Bad Credit

Drivers with adverse information appearing on their consumer reports often look for car loans based on income rather than credit. Traditional lenders are less likely to approve applicants with low FICO® or Vantage® scores.

Buying a car with bad credit and no money down is most feasible when your income is high enough to overcome these negative underwriting factors.

  1. Poor credit means your past delinquencies, charge-offs, and repossessions predict a high risk of future default
  2. No down payment means you are more likely to default because you have no equity in the vehicle


Employment verification is crucial for income-based auto loans. If you want the lender to overlook your credit history, they must feel comfortable that your earnings are actual and will continue until you repay the obligation.

Banks verify income and employment for auto loans in numerous ways. Sometimes, they purchase reports from outside companies that compile these data from payroll companies and other sources. Other times, they call your employer to confirm the information provided on the application.

Be prepared.