How to Qualify for a Car Loan

Car loans help get you into a car without saving up.
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To qualify for a car loan, you must meet the lender's criteria. If you have bad or limited credit, a non-traditional income or a bankruptcy in your past, it can be more difficult to secure the loan you need. But knowing what's expected of you, and being organized, may help you get that loan.


Most lenders require that car loan applicants have a minimum monthly income that may vary by company. They will require copies of your pay stubs or other documentary proof that the income you report is accurate. If you don't have a traditional income and cannot show proof of regular pay, you may have to supply bank statements or other verifiable evidence that you have the means to repay the loan.


If you're planning to buy a new car, your lender will often require that the car is insured before signing off on the loan. Letting the car roll off the lot before it is properly insured can place the dealer at risk if there is a theft or accident and the car becomes a total loss. If you don't make the payments, the car cannot be repossessed and the buck stops with the dealer.

Identity & Address

Proof of who you are and where you live are typical staples of the borrowing process no matter what type of loan you are requesting. Federal regulations as well as bank policy dictate that a lender must be certain who is receiving money that is being distributed and where they live should there be a need to contact them or collect on an unpaid debt. Your driver's license, passport and utility bills are acceptable in most cases.

Credit Check

A credit check tells your lender if you have a history of paying your debts or if you are a risk as a borrower. The target score that lenders may deem acceptable may vary, but each has a set minimum. If you have a bad credit score, some lenders may charge you a higher interest rate or require you to contribute a large down payment to the purchase, thus protecting their investment and making sure you have something to lose by defaulting. If your credit is questionable or you find yourself being refused for a car loan, consider using a cosigner to help improve your chances.

Credit Union Loans

If you belong to a credit union, it should be your first stop when shopping for an auto loan. In many cases credit unions offer better interest rates and personal service to their customers than traditional lenders. To secure the loan, you need a good credit score, a good history as a customer with the union itself, and -- the most important requirement -- membership in the union. Some credit unions are open only to company employees or labor union members, while others require little more than living in the area to qualify.

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