Car loans are often easier to get then a standard bank loan, because car loans are secured loans. An example of an unsecured loan is a bank loan or a credit card: the bank cannot seize an asset to repay the loan if you don’t make your payments. A car loan, on the other hand, is secured by the car itself. If you don’t make your payments, the lender repossesses the car, sells it, and uses the proceeds to recover their original loan. Because the loan is secured, it is less risky, and therefore it is easier for the lender to decide to lend you the money.
What do I need to qualify?
Obviously, the better your credit, the easier it will be to get the loan. Even with a bankruptcy on your credit report, you may still qualify for a car loan.
Often, and especially if you have bad credit, car loan lenders will require the following to approve your application:
- a security deposit or down payment;
- proof of income (many car loan lenders will require a proof that you are earning a certain amount, and that you have been at your job for a period of at least six months); and
- you will probably be charged a higher interest rate than someone with perfect credit.