You may ask yourself if you’re able to purchase a car when your sole income is social security. The answer is yes, given the right circumstances. Like any income, social security is a set amount of money that comes in each month, so as long as your budget can support it, there are dealers willing to finance someone on SSI (Social Security Income).
The Bad Credit Conundrum
The biggest threat to a car loan approval with SSI is bad credit. The concern lenders have is that SSI cannot be garnished. What does that mean exactly? If you’re already someone who has poor credit, you have a history of nonpayment. If you default on your auto loan, there is not a lot a lender can do to get their money back, which makes them cautious.
There are a few instances lenders will overlook bad credit:
- You have a secondary, garnishable source of income
- You have a co-signer
- The applicant has a long-time residence, and the poor credit stems from situational bad credit instead of habitual bad credit
If your credit is good, you’ll have an easier time getting a loan on SSI. If your credit is a deal-killer to lenders, you may have to use the income you plan on using for a car loan to reduce other debts first and improve your credit score.
Finding a Co-signer
Co-signers can make a world of difference in any lending situation. If you have a friend or family member with excellent credit, it may be worth having a conversation with them. Be transparent with your budget, show them what you’re able to pay and ask if they’re willing to co-sign an auto loan with you. The other perk of using a co-signer is the ability to get better rates, or put down less of a down payment. It may save you money in the long run if a co-signer is a valid option for you.
Be Realistic
The number one thing to understand when applying for a loan on SSI is that you have to be realistic about your big financial picture. Sit down and do the math. Look at your debt-to-income ratio, your budget and determine how much you’ll be able to spend on a car, gas and insurance each month. Set aside that money for a few months to see what it’s like to pay that amount regularly—you can use the saved “payments” as a down payment. Don’t expect to get your dream car. If you need a car to get from point A to point B, what’s the least expensive option you can find that’s reliable? Everyone’s entitled to a vehicle, especially if you live in an area that lacks public transportation. Just don’t let it become something that stresses your finances to the breaking point.
What You’ll Need to Apply for a Car Loan on SSI
You’ll want to gather a few items if you plan to apply for an auto loan using your Social Security Income. They are:
- Personal information: Name, address, date of birth, SSI amount
- Social Security Income information: Statements, proof of deposit and potentially, proof that your SSI will continue for the length of the loan
- Budget and financial picture: To expedite the process, provide the lender with your debt-to-income ratio, budget and any notes on future changes in your finances—for example, if something will be paid off soon, you may have more money
Do Your Research
Since living on SSI is limiting, it’s important to look for a vehicle that’s reliable, has a good reputation and low repair costs. Buying a car is only the beginning, and it’s important to factor in all of the possibilities. Make a list of potential makes/models/years and make sure replacement parts or general upkeep isn’t specialized, expensive or hard to find.
As long as you approach the situation with all the information in mind, getting an auto loan on SSI is possible. It may take a bit of legwork, research and time, but there are lenders that will make a car purchase using SSI happen for you.
