How to qualify for a car loan

In general, the most important factors on any loan application are your credit and income. But you’ll also need to think about the vehicle you want to buy, the down payment and more before you apply. If you can’t qualify on your own, take some steps to up your chances of approval.

There are 9 requirements to get a car loan

Most lenders require some or all of the following criteria to get approved for a car loan:

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1. Strong credit

The credit score you need to get a car loan depends on which lender you apply with. While there are car loans available to all credit types, you’re more likely to get approved with at least good credit — that’s a 670 credit score or higher.

If you have a 600 or even 500 credit score, it’s still possible to get a car loan. But you’ll have less of a selection and higher rates.

2. Regular income

You can’t get a car loan without showing that your income can support the monthly repayments. Some require you to work full time, while others accept part-time work or government benefits. And you’ll need at least one of the following documents as proof:

• Most recent pay stub
• W-2 form
• Social Security or government benefits statement
• Bank statements
• Most recent tax return

If you’re self-employed, there’s a chance you’ll need to submit more documents to prove your income — if you can qualify at all.

3. Low DTI ratio

Lenders generally look for a debt-to-income ratio (DTI) under 43%. This means your monthly debt payments and bills are less than 43% of your monthly income before taxes.

While lenders often don’t advertise this as a requirement, most consider it and have maximum DTI criteria for all applicants.

4. Eligible vehicle

Your lender might have limits on what model and make they’ll finance. If you’re buying a used car, you’ll have to also meet mileage and vehicle age requirements.

Usually, the vehicle can’t have more than 100,000 miles or be more than 10 years old, though it varies by lender.

5. State-issued ID

Federal law requirers lenders to verify your identity by checking a government-issued ID. Typically, they’ll ask for a driver’s license, permit or non-driver ID card issued by the DMV. Or, you may be able to use a passport or other ID that your local government issues.

6. Resident of eligible state

Using a passport or other ID that doesn’t include your address? Lenders generally ask to see proof of address, like a utility bill, to verify that you live in an eligible state.

7. Working phone number

Most lenders require you to provide a phone number on the application as a required field. Like the DTI, you won’t find this in most eligibility requirement lists.

But you generally can’t even fill out a prequalification form without a phone number — let alone the application. Lenders like to use this to get in touch if necessary. Not having a phone number also looks like a lack of stability to a lender, which would likely disqualify you from a loan.

8. Personal reference

While not common, some lenders ask for the name and contact information of people who can vouch for your trustworthiness. There may be restrictions on who you can choose — sometimes family members aren’t allowed.

9. Down payment or trade-in

While it’s possible to finance 100% of your new car, many lenders require a down payment. These usually start at around 10%, though you’ll generally get a better deal with a down payment of 20% or higher. Turning in your current vehicle for its cash value can contribute to the down payment.

Of those who have access to a vehicle, 89% say that they own their vehicle and the majority of owners say they own a car (88%).

What else do lenders consider?

In addition to hard eligibility requirements, the following factors can also play into your application:

• Where you’re buying the car. Generally, lenders favor cars bought directly from a dealership. Many won’t allow private-party purchases, and those that do often charge higher rates.
• New vs. used. Used car loans tend to come with higher rates than financing a new car.
• Loan amount and term. Credit unions in particular offer different ranges of interest rates depending on your loan amount and term.
• General credit profile. In addition to your credit score, lenders consider factors like how much debt you have in your name and the length of your credit history.

Who is most likely to be researching how to qualify for a car loan?

Finder data suggests that men aged 25-34 are most likely to be researching this topic.