Guide to Auto Loan Requirements and Approval

Q: What is required to get approved for a car loan?

Requirements for car loans may vary from lender to lender, but borrowers generally need to provide proof of identity and proof of income to get approved for a car loan. Lenders may also require borrowers to provide proof of residence, proof of auto insurance, and basic information about the vehicle being financed. There’s no guaranteed path for how to get approved for a car loan, but lenders may consider your application if you can prove your identity. Some lenders may not require income verification from applicants who use a cosigner for a car.

Q: What credit score do you need to qualify for an auto loan?

Getting approved for a car loan may not require good credit. Consumers with bad credit may also qualify for auto loan financing, including deep subprime borrowers with credit scores between 300 and 500. Borrowers with bad credit can get approved for auto loan financing but may not qualify for a lender’s best rate of interest. Deep subprime borrowers had an average auto loan rate of 14.76% on new vehicle financing in the first quarter of 2022 compared with 2.4% for super prime borrowers with excellent credit scores between 781 and 850, Experian data show. This shows that any particular credit score needed for car loan financing can be any score between 300 and 850.

Q: Can you get an auto loan with a credit score of 500 or less?

Yes, you may qualify for auto loan financing with a bad credit score of 500 or less. Experian’s auto loan financing data show 2.34% of loan transactions on new and used vehicles in the first quarter of 2022 went to deep subprime borrowers with credit scores between 300 and 500.

Car Loan Requirements: How to Get Approved

Kelly Boyer SagertUpdated September 12, 2022

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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.

Requirements for car loans can vary from lender to lender, and so can the types of documentation needed for approval. There are, however, many similarities in what a lender will request, including vehicle documentation and proof of identity and income.This post will provide a helpful overview of car loan requirements that you can use when shopping for an auto loan and choosing a lender to ensure you have everything in order when you’re ready to apply.

Credit Score Requirements for Auto Loans

The credit score needed for car loan financing can be any score on the scale of 300 to 850. Any lender may offer subprime auto loans, but these risky products are more commonly associated with independent finance companies and buy here, pay here (BHPH) dealerships. The below table compares which types of lenders may approve auto loans for different credit risk categories:

Lender Type	Risk Category	Credit Score Range
Banks	Nonprime, prime, and super prime borrowers may receive financing from banks	601–850
Credit unions	Nonprime, prime, and super prime borrowers may receive financing from credit unions	601–850
Buy here, pay here dealerships (BHPH)	Deep subprime, subprime, nonprime, prime, and super prime borrowers may receive financing from BHPH dealerships	300–850
Independent finance companies	Deep subprime, subprime, nonprime, prime, and super prime borrowers may receive financing from independent finance companies	300–850
Captive finance companies affiliated with auto manufacturers	Subprime, nonprime, prime, and super prime borrowers may receive financing from captive finance companies	501–850

What Documents May Be Required for a Car Loan?

In general, expect lenders to require the following documents:

Proof of identity
Proof of income
Proof of residence
Vehicle documentation
Proof of insurance

Lenders will also likely have credit score parameters, as well as standards for what’s required in a down payment. While there’s no set credit score you’ll need to get an auto loan, borrowers with good or excellent scores (in the mid 600s and up) tend to have an easier time obtaining a loan and securing better rates.

Auto Loan Requirements: Proof of Identity

A requirement for a car loan you’ll need to meet is providing proof of identity. These are the types of documentation lenders will likely accept to confirm that you are who you say you are:

Government-issued IDs
Passport
Birth certificate

Government Issued IDs

Official photo IDs are commonly used to identify a person, including when applying for a car loan. These include driver’s licenses, state-issued IDs, and U.S. military identification cards. Another frequently required government-issued ID is your Social Security card.

Passport

Passports are typically used when someone wants to travel to a foreign country, but lenders may ask for one to confirm the identity of loan applicants. If you don’t have one, you can find information about how to get one at this U.S. government site. Processing times can vary, based on the time of year, and receiving one may take longer during the pandemic.

Birth Certificate

You may already have yours. If not, and if you’re U.S.-born, contact the vital records office in your state to request a duplicate. You may need it fairly quickly to meet your car loan requirements. If so, ask about expedited service options.

Auto Loan Income Requirements: Proof of Income

As part of the requirements for getting a car loan, a lender will typically require you to prove how much income you earn to ensure that you make enough to qualify for the loan. There’s no universally required income to get a car loan, but a pre-tax monthly income of at least $1,500 to $2,000 can serve as a general guideline.Ways to prove your income include providing the following:

Pay stubs
Bank statements
Wages and tax statements

Note that no income verification auto loans do exist, but here are more specifics about what might be needed if you’re applying for loans that require income verification:

Pay Stub

One of the simplest ways for a lender to get a quick snapshot of your income is through your recent pay stubs. So, if you get paper ones, keep them. If you have online ones, share them. If you don’t have all you need, ask your employer for copies.

Bank Statements

The lender may ask to see recent bank statements, which can show how much money comes in (although directly deposited paychecks will be net, not gross) and how much is going out. This, in combination with pay stubs, may be all that a lender requires.

Wages and Tax Statements

Some lenders will want to verify wages with copies of your tax returns. They may request the most recent return or more than one year’s worth. If you’re self-employed, this can be the best way to indicate what you’re earning (through your Schedule C).

Requirements for Getting a Car Loan: Credit History

Credit score requirements for auto loans can vary by lender — and it’s generally true that the higher the score, the better the chance that you’ll get a good interest rate with favorable terms. Overall, a lender wants to see that you’ve handled your debt well in the past because that’s a good predictor of how you’ll manage it going forward.If your credit score isn’t quite where you’d like it to be, be prepared to share with the lender how and why it happened, along with your plan for making your car payments on time in the future. Sometimes, a lender will require you to get a cosigner with good credit before approving the loan.

Auto Loan Requirements: Proof of Residence

Lenders will want to verify where you live, and there are numerous methods they might find acceptable, including:

Utility bills
Government-issued IDs
Property tax bills

Utility Bills

Bills for gas, electric, water, and the like will list an address, and a lender can compare that with what you’ve provided on your car loan application.

Government Issued IDs

The lender can also compare the address on your application to what’s on your driver’s license and Social Security card (or other acceptable form of a government-issued ID).

Property Tax Bills

These bills demonstrate that you’re paying taxes on a particular property. You may directly receive them, or they may be part of an escrow statement from your mortgage lender.

Vehicle Information

When buying a car, your lender of choice will need information about the vehicle, including the purchase agreement from a dealer or person. Key pieces of information within the document will include the price; the make, model, and year of the vehicle; and its vehicle identification information (VIN), among other things.

Current Vehicle Registration

A vehicle must be registered in the name of the current owner for it to be legally driven on public roads. If you buy a car from a dealer, new or used, they usually provide you with at least a temporary registration; other times, they’ll handle the whole process. If not, you’ll need to check with your local Department of Motor Vehicles (DMV) to see how to transfer the registration into your name.

Requirements for Auto Loan: Proof of Insurance

Your lender will want to see that you’re able to get insurance coverage on the vehicle you’re buying. What’s required can vary, based on the state in which you live and the specific requirements of the financial institution. In general, however, you’ll need to have car insurance on your new ride before you can drive it out of the dealership lot.Proof of insurance can include:

Insurance ID cards
Coverage letters
SR-22 form

Here’s more about each:

Insurance ID Cards

Traditionally, insurance ID cards have been paper, but there are now digital cards that have the same information. This includes your name and policy number, along with vehicle information and dates of coverage.You’ll need to have proof of insurance with you when driving, as your ID card lists relevant information that law enforcement will want to see in case of an accident.

Coverage Letters

You can also use a declaration page, which provides an overview of who is covered (and who, if anyone, is specifically excluded); your policy number and coverage dates; the make, model, year, and VIN of the covered vehicle(s); and other relevant information.

SR-22 Form

This is a certificate that verifies that you have at least the minimum amount of car insurance required by your state. “SR” stands for “safety responsibility,” and it’s a form of certification that confirms you have enough insurance without getting into the specifics of your policy.

Method of Down Payment

As part of a lender’s car loan requirements, you may need to make a minimum down payment. This can include a combination of cash that you’ll put down and the trade-in value of a vehicle that you’ll turn over to the dealership.How much of a car down payment should you make? The traditional answer has been 20%, but not everyone puts down that much. To answer this question for yourself, find out what a lender requires and also consider your finances and how they may change over the next several years (meaning, over the term of the car loan).Recommended: 84-Month Auto Loans: Pros and Cons

Do You Need Any Additional Documents to Refinance a Car Loan?

With an auto loan refinance, a lender will typically want the same type of information that was needed for the original loan along with information about your current loan, including the lender and outstanding balance. That said, check with your lender of choice to make sure that you have all of the documentation required.As another consideration, when deciding what lender to choose, also ask about the auto refinance time frame and determine whether it’s workable for you.Refinancing for a lower monthly payment in some cases may extend your term, and extending your term can saddle you with more interest charges over the life of your loan. An auto loan refinance calculator can help you see whether a refinanced loan offer may increase or decrease your total interest costs.Lenders can implement their own requirements for auto loan refinancing. Some lenders may offer low credit score car loan refinancing.

4 Tips for Auto Loan Approval

Getting approved for a car loan can be challenging, particularly if you have bad credit. There’s no guaranteed path for how to get approved for a car loan, but these four tips may help:

1. Choose a Budget

You may choose a budget that works for you when seeking auto loan financing. This can include identifying a target purchase price for a new or used car and sticking to the budget.Consumers may ask, “What happens to car loans when someone dies?” The answer is that car loans do not simply disappear when a borrower dies. A surviving spouse may be responsible for paying the debt, or a lender may move to repossess the vehicle.

2. Steady Income

Having steady income from salaries, wages, or any other source can help you get approved for a car loan. Lenders may assess your debt-to-income ratio when deciding whether to approve or deny your loan application. If you’re drowning in car loan debt, you may wonder, “Can someone take over my car loan?” Transferring an auto loan can be a complex process, but it may be an option for you.

3. Buying a Newer Car

Buying a newer car may help you get approved for financing as opposed to buying an older vehicle. Some lenders, for example, may deny financing a 10-year-old car or a vehicle with more than 125,000 miles on the odometer.

4. Larger Down Payment

A larger down payment may prevent you from getting an upside down auto loan in which your loan balance is greater than your car’s resale value. It’s generally better to have positive equity in your car rather than negative equity that leaves you underwater. A larger down payment can minimize your borrowing expenses and monthly car loan payment, which lenders may take into account when making financing decisions.

More Auto Loan Refinancing Tips

Auto loan requirements can vary by lender, with documentation often needed. This may include verification of your identity, income, residence, and auto insurance, along with additional information about your financial situation, your credit history, and the vehicle being purchased.When refinancing a car, similar information is typically needed, along with details about the outstanding loan on the vehicle. To compare offers from multiple lenders in the Lantern by SoFi network, just fill out one convenient auto refinancing application.

Frequently Asked Questions

What is required to get approved for a car loan?

What credit score do you need to qualify for an auto loan?

Can you get an auto loan with a credit score of 500 or less?

Photo credit: iStock/Saklakova

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About the Author

Kelly Boyer Sagert

Kelly Boyer Sagert is an Emmy Award-nominated writer with decades of professional writing experience. As she was getting her writing career off the ground, she spent several years working at a savings and loan institution, working in the following departments: savings, loans, IRAs, and auditing. She has published thousands of pieces online and in print.

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