Brian D. Perskin & Associates

How Will Child Support Affect Your Ability to Get a Loan?

Whether you receive child support or have to pay it, you may find that getting a loan is a little more complicated now. Of course, you should not typically be out of the running for a loan just because of child support. Get an idea of how paying or receiving child support may affect you on a loan application.

Be Prepared to Offer Documentation

No matter what kind of loan you apply for, you will need to provide documentation to show you receive child support if you are counting it as part of your income. A divorce decree that shows the amount you are paid every month, and how long you will get it, should work. This is just to show that you can in fact afford the loan you are applying for. Of course, if your income without the child support is more than enough to pay back the loan, the lender might not request documentation after all.

What Do Lenders Think of Child Support Income?

You might have trouble getting a loan if child support is the only income you have, or if it makes up most of your income. This is because if you default on the loan, child support cannot be garnished, so there is a chance the lender will not be able to recover the money. However, if you have income from a job or some other resource, you improve your chance of getting a loan since that income can often be garnished when necessary.

What If You Pay Child Support?

You need to let lenders know if you pay child support, since that means part of your income is unavailable for you to repay the loan. As long as it is not too big a percentage of your income, this should not bar you from getting a loan for a car, house, or business.

However, if you are behind on your child support payments, the lender will see any liens or wage garnishments on your credit report. This will look bad for you because the lender will not want to take the risk that you will get behind on your loan payments, too. In addition, many people who get behind on child support frequently switch jobs once wage garnishment begins. This means you might suddenly have no income, making it hard to pay back your loan. Either, you are a risk for the lender when you are behind on child support.

Clearly, if you receive child support to supplement other income, or if you are current on your child support payments, you should not have a problem getting a loan. In this way, child support does not have to affect your financial future in a negative way. However, if you are often late on payments, or if you have little income aside from child support, you may need to settle for a higher interest rate or no loan at all.

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