Choosing the Right Car Insurance If You Have an Uncertain Income Ratio
With an uncertain income ratio can come worry. You may wonder how your financial reality will affect your ability to get a loan or pay your insurance premiums. Fortunately, you have options.
Income Ratio
Your debt-to-income ratio is calculated by dividing your total debt by your gross income. If your income is uncertain from month to month, then this ratio will be as well. This can be a red flag for lenders if you’re applying for a mortgage or financing a car, but it’s important to know that it doesn’t mean you won’t be able to get car insurance.
Auto Insurance Price Factors
In general, other factors weigh more heavily than your income ratio when it comes to how much your auto policy will cost. For example, your driving record plays a large role in determining your premiums. The fewer dings to your record, the less you’ll pay for insurance.
Your location also factors in, as living in an area with more theft or vandalism can raise the price of your policy. Accidents are more common in cities than they are in rural areas, so living in an urban area may come with a price.
Your car and how much you plan on driving it are important considerations as well. Cars with good safety ratings often earn you better rates, though a large SUV that could do a lot of damage to another car may require a higher premium. Used cars can be less expensive to insure, which is why they’re a popular choice for people with low or uncertain income.
Your income ratio shouldn’t directly affect how much you pay for car insurance. However, if you have a lot of debt, your credit score is potentially low. Your credit can tell insurers how likely it is that you will file a claim, and that likelihood influences your rate.
Lowest Cost Insurers
Getting great insurance when you have lower credit starts with the car you select. When buying a used car, for example, choose a model with a superior safety rating and a proven track record. Look for features — like automatic emergency braking, blind spot detection, and lane departure warning sounds — that minimise your risk of an accident.
Many auto insurers see lower credit and high risk driving as overlapping. As a result, shopping for insurance that appeals to high-risk drivers can be to your advantage. Get quotes from companies that market to such drivers and compare. The more research you put into comparison shopping, the lower the rate you should be able to find.
There are some companies that don’t check credit. Going with one of these options may work for you, but know that the premiums can be higher than those of insurers that do check credit.
Credit Score Improvement
Ultimately, improving your credit score is the best way to lower your auto insurance rates over time. If you’re unable to obtain regular income, you can still work on decreasing your debt and improving your income ratio — and therefore, your credit — in the process. For example, instead of determining a fixed dollar amount for paying off debt, you may choose to go with a percentage of each month’s income.
Contact lenders to ask about reasonable payment plans and lower interest rates. They may be willing to change your loan terms. If you’ve suffered hardship, you might consider applying for financial assistance. Either way, make sure you pay your car insurance premiums on time. Over the course of several years of on-time payments, your credit should improve.
It can take some effort to find quality car insurance when your income isn’t stable and you have debt. However, it can be done.
