Getting around, especially outside of urban areas, is tough without a car, and even more so if you have a physical disability. Auto loans make buying a car more accessible for Canadians, but a decent income is typically required to get approved. So, what if you don’t earn an employable income? More specifically, what if you’re currently on the Ontario Disability Support Program (ODSP) or disability benefits?
While it may be possible to get car financing while on government benefits, you’ll need a well-crafted strategy to get approved.
Key Points
- ODSP provides eligible Ontarians with disabilities financial and employment assistance.
- If you’re currently on ODSP, you may still be able to qualify for a car loan, though you may have to take extra steps to get approved.
- Working with an alternative lender who specializes in providing loans to those with unique income and credit situations may be your best bet.
Can You Get A Car Loan While On Disability?
Yes, you can still qualify for a car loan while receiving disability income, including ODSP benefits. However, you may have trouble qualifying with a traditional lender, such as a bank, as their loan criteria are quite stringent. More specifically, they may require sufficient income from employment for you to secure a car loan.
Instead, you may have better luck securing a car loan while collecting disability benefits by applying with an alternative lender. Alternative lenders generally have lower requirements, making it easier to qualify for.
How To Get A Car Loan On Disability
To get an auto loan while on disability, follow these steps:
Step 1: Determine Your Budget
Carefully assess your current debt relative to your income. Having an up-to-date budget will tell you how much money you have left over each month after all of your bills have been paid. This will give you an idea of how much you can afford in car loan payments.
When determining your budget, consider the following:
- Your monthly disability income
- Cost of ongoing vehicle costs, such as insurance, gas, and maintenance
- Your monthly car loan payments
You can use an online car loan calculator to estimate how much your monthly payments might be based on different loan amounts and interest rates.
Step 2. Gather Required Documents
When applying for a car loan, you’ll need to provide the lender with certain documents along with your application. Such documents may include the following:
- Proof Of Disability Income: Bank statements or government documents.
- Photo ID: Driver’s license, health card, or passport.
- Proof Of Residence: Utility bill or rent agreement.
- Employment Information (if applicable): Letter of employment or pay stubs.
Step 3: Find The Right Lender
As mentioned, traditional banks may have strict lending criteria, but alternative lenders may provide more flexibility, especially in terms of income sources. A quick and easy way to find the right lender for you is to use an online loan comparison site, like Loans Canada. Simply plug in your credit score, income, and loan requirements, and the site will quickly populate a list of lenders and their loan offers based on your financial situation.
From there, you can quickly compare each lender and their loan terms to find one that can provide you with a car loan that suits your budget.
Types Of Disability Income Accepted By Car Loan Lenders
Traditional lenders typically require income from a source of employment for car loans, while alternative lenders may accept no-employment income, such as disability benefits. Different lenders may accept different types of income for car loans. Here are a few examples of the various disability assistance programs that alternative lenders may accept for car loans:
| Ontario Disability Support Program (ODSP) | The ODSP provides financial assistance and employment support to qualifying Ontarians with disabilities. | Learn More |
| Canada Pension Plan Disability (CPPD) | Canada Pension Plan Disability is a federal government program that provides financial assistance to those who cannot work due to a severe and ongoing disability. | Learn More |
| Saskatchewan Assured Income For Disability Program (SAID) | Saskatchewan’s Assured Income for Disability program provides financial assistance to qualifying individuals in the province with significant and continuous disabilities to help cover the cost of basic living expenses. | Learn More |
| Alberta Assured Income for the Severely Handicapped (AISH) | Alberta’s Assured Income for the Severely Handicapped program provides financial assistance to qualifying low-income Albertans who suffer with a permanent disability. | Learn More |
Why Is It Difficult To Qualify For A Car Loan On Disability Benefits?
A strong income is a standard loan requirement when applying for a car loan because lenders want to make sure that you’re able to comfortably cover your loan payments each month. It can be more difficult to qualify for a car loan on disability benefits because these payments are often less than regular employment income, and may not always last for the long haul. This might make lenders worry whether borrowers depending on disability benefits will have the ability to repay the loan until the end of the term.
Further, if the borrower’s main source of income is from government benefits and they default on the loan, a lender may not be able to go after that specific source of income to recoup their losses. Given these reasons, it can be challenging to find a lender willing to accept these risks when applying for a car loan while collecting disability benefits like ODSP.
Ways To Increase Your Chances Of A Car Loan Approval While On Disability
If you’re still skeptical about whether your disability will prevent you from being approved for a car loan, don’t worry. There are a couple of extra things you can do that may increase your chances of approval for both the loan and a reasonable interest rate, such as the following:
Keep Your Expenses Low
If possible, take some time to pay down as much of your current debts as possible. A high level of debt will eat into your income, leaving little left over to cover car loan payments. The less debt you carry, the higher your chances of getting approved for an auto loan, especially when you’re collecting disability benefits.
Get A Cosigner
To reduce the lender’s risk and boost your odds of loan approval while on ODSP or any other disability benefit, consider adding a co-signer to your loan agreement. A co-signer is someone with strong credit who promises to take over the loan payments if you fail to do so at some point throughout the loan term. Having a co-signer can increase approval chances, which may be helpful if you’re applying using only your disability income.
Opt For A Less Expensive Vehicle
A used or certified pre-owned car may be less expensive than a new vehicle, which will reduce your loan costs.
Increase Your Credit Score
Your credit score plays a key role in car loan approval. Lenders will check out your credit score to determine your creditworthiness, which indicates your ability to repay the loan. While different lenders may have different credit score requirements, they typically like to see a score of at least 660, which is considered to be in the “good” credit score range.
If your credit score is low, consider taking some time to improve it before applying for a car loan.
Offer A Big Down Payment
When applying for a car loan while on disability, you may want to make a larger down payment. Paying more upfront can not only lower the loan amount you need to take out — and therefore keep your monthly payments lower — but it can also reduce the lender’s risk.
Because of this, the lender may be more willing to approve your car loan application. You may even be able to snag a lower rate by making a bigger down payment.
What Type Of Insurance Can Protect Me If I Can’t Make My Car Loan Payments?
If you’re worried about not being able to make your car loan payments, you may want to consider an insurance policy that provides payouts in the event that you suffer financial hardship due to job loss from a disability or injury. For example, if you suffer a covered illness, injury, or disability, loan protection insurance can provide coverage for some or all of your car loan payments if you can no longer make loan payments. When you add this type of loan insurance to your loan contract, your premiums will be added to the loan amount.
Alternatives Ways To Buy A Car While On Disability Income
Aside from using disability income as a source of income to help you qualify for a car loan, other options are available to help you purchase a vehicle while on disability benefits:
Save Up And Purchase A Used Car From A Private Seller
Rather than depend on a car loan — and your ability to get approved for one — consider taking some time to save up to buy a used car outright. Plus, buying used allows you to avoid the high rate of depreciation that’s typical over the first couple of years with a new car. Moreover, you may have more power to negotiate a price with a private seller than a dealership.
Lease
Monthly lease payments are usually cheaper than financing payments. That’s because with a lease, you’re mainly paying for the car’s depreciation during the lease term, and not the full purchase price. These lower monthly payments may fit better with your disability income.
Search For Transportation Services In Your City
Rather than buying a car, you may be able to take advantage of transportation services in your area that cater to those with mobility issues who need help getting around. One quick and easy way to find these services is to use www.211.ca. Here are a few examples of transportation services that you’ll find on the site:
- Toronto Transit Commission (TTC) Wheel-Trans. This service provides specialized public transportation in the Greater Toronto Area (GTA) with accessible buses and sedan taxis 24 hours a day, 365 days a year.
- Sprint Senior Care. This community and home support agency provides various services to seniors in Toronto with mobility issues, including meals on wheels and transportation services.
- Seniors Transportation and Ride Services (STARS). Provided by Chilliwack Community Services, this program provides seniors in Abbotsford and Chilliwack, BC, with safe and reliable transportation services for errands, appointments, and social events.
Final Thoughts
Getting a car loan while on ODSP or disability benefits may be challenging, but it’s still doable. That said, it requires careful planning. To increase your chances of car loan approval, be sure to check your credit score, save up a big down payment, and choose the right lender.
