Auto Loan Approval: Is a Drivers License Required?

January 27, 2012

Getting an auto loan approval requires you to produce many pieces of documentation. Many are financially based, such as proof of income and credit history, which are designed to protect the lender from making a bad loan. The lender would like to assure him or herself that you are a good credit risk before making a loan to you.

The Importance of a Valid Driver's License

For this reason, the lender may ask you for a driver's license before completing an auto loan. If you are a single person applying for a loan in your own behalf, then the lender is likely to ask for a copy of your driver's license to assure himself or herself that you are legally authorized to operate the vehicle.

Again, this protects them from having a person default on a loan, since a driver who has been arrested for driving without a license will be unlikely to continue making payments on a car he or she can't drive.

Exceptions to the Rule

There may be cases in which lenders will make an exception to this rule. Within families, for example, there may be an unlicensed minor who is purchasing a car in preparation for the day when he or she can drive.

In this case, a parent will be a co-signer on the loan, and will also likely provide proof of auto insurance for the debtor, and guarantee that the payments will be made regardless of whether or not the student gets the license as planned. In such a case, the lender will likely complete the loan without a driver's license.

If there is a spouse that does not drive because of lack of desire, fear, physical disability or any other reason, yet that spouse is the one that has the income and is purchasing the car, then the lender will consider all of the other requirements for purchase and disregard the lack of a driver's license.

Anytime a person or entity (such as a business) with money but no driver's license is buying a car in behalf of someone without a license, the lenders will be very likely to approve the auto loan, as long as the person with money is a good credit risk.

In the case of a suspended license, the process will be more difficult and may depend on the subjective judgment of the loan officer regarding the likelihood that you will regain your license.

Building Trust

A borrower can look at the lending process as a way to build the trust of the lender. The more reliable documentation you provide, the more likely the lender is to trust that you will pay back a loan.

If you are in the position of being the sole borrower on a vehicle and the one who will primarily drive a car, you can expect to be required to show proof of a current driver's license along with proof of insurance, income and all the other documentation.

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