No income verification car loan: A complete guide

With the average price of a new car exceeding $50,000, qualifying for a car loan can be challenging for anyone. If you have trouble proving your income, it is that much harder. For people who are self-employed, in between jobs, working on commission, or in similar situations, a no income verification car loan can be a good option. Whether you're buying a new or used vehicle, here's everything you need to know about getting a no income verification auto loan.

Do lenders check your income when applying for a car loan?

Lenders typically require income verification on car loan applications. They review pay stubs, income tax returns, bank statements, or other proof of income when applying for an auto loan. This helps them calculate your debt to income ratio, which is the comparison of your monthly income against your minimum debt obligations listed on your credit report.

However, some lenders offer loans without income verification, especially if you have a good credit score and an existing relationship with the bank.

Is it possible to get a no-income verification car loan?

Yes, it is possible to get a no income verification car loan when you have a low debt to income ratio and Good to Excellent credit. Some lenders may also factor in other assets, like home equity, bank balances, or investments, when reviewing your credit application.

If you don't have a regular W-2 job, getting approved for a car loan can be challenging. However, it is not impossible. There are many lenders who will consider non-traditional income sources during underwriting. These alternative income sources may include:

• Self-employment
• Social Security
• Pensions
• Annuities
• Trust disbursements
• Rental properties
• Dividends and interest

No-income verification auto loan options

If you have trouble proving your income, or if your verifiable income is lower than you need to qualify for a loan, then a no income verification car loan may be the best option for you. Here are a few of the financing options you should consider.

Traditional bank or credit union

A conventional auto loan from a bank or credit union typically requires income verification. However, if you have an established relationship and regular deposits in your personal bank account, the bank may not require pay stubs, tax returns, or other documents.

I've had the same bank account for the last 20 years, and when I needed to replace my car, I was able to get approved for a competitive interest rate and loan terms. I had just moved and was building my writing career, so I didn't have a consistent paycheck or a tax return history for my business. However, because I was a long-standing customer with good credit and regular deposits into my account, I was able to get loan approval without providing any documents to verify my income. Not all banks act this way, but it is worth submitting an application to see what you can qualify for.

Personal loan from an online lender

Online lenders offer quick access to loans, often with little-to-no verification of income. In most cases, online lenders approve borrowers based on their credit score and stated income. For this reason, it is important to maintain a good credit score and take steps to boost your score 30 to 60 days before applying. This gives time for the credit bureaus to update your credit history with new information that can increase your credit score.

With a personal loan from an online lender, you can shop around to find the best price on the car of your dreams. You aren't restricted to a certain dealer, which gives you more negotiating power when talking with the dealership. Since the loan is unsecured, loan approval is based on your personal credit rather than being tied to the value of the car. Keep in mind that unsecured loans may have higher interest rates and fees than an auto loan.

Home equity investment

If you own your home, you may be able to tap your home equity to buy your car. A cash-out refinance, HELOC, or home equity loan typically have the same or tougher requirements and income verification than an auto loan. However, you can get cash through a home equity investment (HEI) even if you have less-than-perfect credit and cannot prove your income.

With an HEI, you receive a lump sum of cash upfront in exchange for a share of your home's future appreciation. You don't have to make monthly payments, and you can repay the money at any time. Otherwise, you'll pay back the money when you sell or refinance your home down the road.

401(k) loan

For people with bad credit, getting a 401(k) loan is one of the few guaranteed options when you need money quickly. As long as your employer offers 401(k) loans, you can get loan approval without a credit check and worrying if your income qualifies for the loan.

According to federal law, you can access up to 50% of your account balance or $50,000, whichever is lower. However, your employer may have stricter limits on the loan terms when accessing your 401(k). While these loans are easy to get approved for, they can be risky for your finances. During repayment, the loan amount is not invested in the stock market. Additionally, if you cannot make payments or leave your job before the loan is repaid, any outstanding balance is treated as a withdrawal. You'll owe income taxes and possible penalties on the withdrawal amount.

Tips to improve your chances of getting approved with no income or low income

Even when a lender doesn’t verify your income, having good credit and a strong application gives you the best chance to get approved for a no income verification auto loan. Follow these to boost the strength of your application:

• Fix your credit. Review your credit report to look for errors and identify accounts that you can pay off quickly. Ideally, your credit cards should be at or under 30% of their credit limit.
• Make a larger down payment. Having a larger down payment puts more “skin in the game” to give the lender more confidence in your desire to pay off the loan. A lower loan balance also results in a smaller monthly payment and may qualify you for a lower interest rate.
• Buy a cheaper model. Reduce the amount you need to borrow by buying a cheaper model or getting a used car instead of a new one.
• Shop around. While some lenders or dealers may require income verification, others may approve you without it. Shopping around can also help you qualify for lower interest rates and better loan terms.
• Add a co-signer. If your credit is poor or you don’t have an extensive credit history, adding a co-signer can help you get approved.
• Secure the loan with assets. Even if you can’t prove your income, a lender may be willing to lend to you if an asset backs up the loan in case of missed payments.

The bottom line

If you cannot verify your income or your income isn’t high enough to qualify, it is still possible to get approved for a new or used vehicle. While traditional lenders and dealer finance departments typically require proof of income, other lenders and financing options can be a smart choice. Online lenders have lower underwriting requirements than traditional lenders, and 401(k) loans let you borrow from your retirement funds. Homeowners can tap their equity with a home equity investment without requiring monthly payments.