Do Benefits payments count as income for car finance? | Car Finance 4 Bad Credit
Do Benefits payments count as income for car finance?
One of the most common questions we get from people who are on benefits or receiving supporting payments is: Which benefit payments count as income?
No Prime or Near Prime Lenders accept benefit payments as income (except for Pension payments) but the good news is that some more progressive lenders that work with people that have poor or less than great credit profiles do accept benefits.
In order to have your benefit count as income you will need to be receiving one or more of the following:
Disability Living Allowance (DLA)
Carers Allowance (CA)
Personal Independent Payment (PIP)
Pension
Provided you receive one of these then the following count as income:
Child Tax Credit
Child Benefit
Child Maintenance Payments
Working Tax Credits
Universal Credit
Personal Independence Payments
Housing Benefit
Social Housing/Rent
Carer’s Allowance
Guardians Allowance
Foster Care Allowance
Disability Living Allowance
Attendance Allowance
Constant Attendee Allowance
Armed Forces Independence Allowance
Industrial Injuries Disablement Benefit
Reduced Earnings Allowance
State Pension
Occupational Pension
Personal Pension
Stakeholder Pension
War Widows Pension
Bereavement Allowance
Widowed Parents’s allowance
It is worth noting that most lenders will accept: Consistent Commission payments, Regular Overtime, Income from previous employment, Dividends ( Directors) Rental Income, Car Allowances and NHS Bursaries.
Unfortunately, lenders in this space do not accept benefits payments that, in their view, could be temporary in nature and this includes:
Annual bonus, Unemployment Benefits, General Expenses (even if they occur regularly), Non-Nursing Bursaries, Student Grants or Awards, Jobseekers allowance, Employment and Support Allowance, Income Support, Maternity or Paternity Pay
Other factors that may affect car finance acceptance
Most lenders in this space look for a minimum income of £1,000 per month for individual applications or £1,300 for joint applications and due to affordability the monthly cost of the car cannot be more than a certain percentage (normally 25%).
Unpaid Direct Debits will also count against the applicant though if you have 3 or less within a 2 month period you may still be successful.
Proof of Income
When you use a benefit payment as a form of income then you may be asked to provide proof of this benefit. These days many lenders use “Open Banking” in order to have a view on your outgoings and incomings and of course these benefit payments will appear your statements when accessed through Open Banking or they may ask for a seperate upload of bank statements though this is increasingly rare.
What is Open Banking and how does it work?
Open Banking is technically legislation forcing all UK banks to allow customers to share data securely with other financial institutions including car finance lenders should you want to.
If you are happy to allow Open Banking (which is becoming increasingly common) to be used then you will be sent a link. If you open the link you will then be asked which bank you bank with and if you agree to share information with the lender. Once you agree, the lender can see your incomings and outgoings on your bank statement which allows them to make an informed decision on affordability of the loan.
In summary: Some car finance lenders will accept some types of benefit payments as a form of income. Lenders often have an income threshold below which they won’t lend and many lenders are now using Open Banking to check affordability.
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