Lenders have found a direct correlation between monthly income and loan performance. Seems to make sense. The more money you make, the more money you have to make your payments. Granted, it does not necesarrily mean that people who make more money pay their bills on time, or manage their money well. However, the first part of paying your bills requires you to have money in the bank.

So why haven’t lenders stopped lending money to people who make less than $12,000 per month? Because lots of people who make less money than that can pay their bills on time, and repay loans. What is the lowest amount of money someone should make to consider obtaining an auto loan? The answer to that question depends on who you ask, and when you ask them.

Several years ago there were lenders that would allow someone to get an auto loan with as little as $1,000 or $1,200 in monthly income. Over the years, the average minimum income required by auto lenders has steadily increased. First, to $1,500 per month, then $1,800, then $2,000. Now, many of the lenders we deal with every day have raised their minimum income to $2,500 per month.

What does a minimum required income of $2,500 per month mean?

People that make $10/hour ($1,730/month), $12/hour ($2,079/month), or even $14/hour ($2,426/month) cannot qualify for an auto loan with many lenders. Many people live off of $14/hour or less and for many people it is impossible to find work that roughly twice the national minimum wage.

Why did this happen?

The economy started going South about a year ago, and as loan losses started to pile up the lenders have been forced to “tighten” their underwriting in an attempt to improve their loan portfolio. Higher gas prices, food prices, and unemployment rates have forces many lenders to close their doors or significantly restrict their lending practices. Let’s just hope that this “tightening” gets looser soon. Lots of deserving people need auto loans.

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