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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.
Most lenders require some or all of the following criteria to get approved for a car loan:
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.
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:
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.
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.
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.
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.
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.
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.
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.
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.
In addition to hard eligibility requirements, the following factors can also play into your application:
Even if you think you’ll qualify, these steps can increase your odds of getting a good deal:
Not necessarily. Personal loans usually don’t require collateral, which is more of a risk to the lender. That’s one of the reasons why they tend to have higher rates and shorter terms than your typical car loan. While you can use a personal loan to buy a car, it might not be your best option.
Most lenders want to see that you have good credit, low debts and the income to pay off a loan. Generally, you need to show that you’re financially stable enough to make your repayments on time. Check our guide to auto financing to find a car loan to apply for today.
How hard is it hard to get accepted for car financing?
It depends on the lender. But since most car loans are secured, they’re easier to qualify for than an unsecured loan — like a personal loan.
When will a car dealership contact my employer?
It depends on the dealership. Many are satisfied with proof of income, like a pay stub or bank statement.
What happens if I lie about my income on a car loan?
Lying about your income is hard to do since you need to provide proof of income to back up the number you write on the application. If you don’t meet a lender’s income requirements, you might want to rethink getting a car loan in the first place.
Lack of adequate income means you’re setting yourself up to miss repayments. This can damage your credit, get your car repossessed and dig you deeper into debt.
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