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Auto Loans with No Driver’s License: Possible?

Getting an auto loan with no driver’s license is possible, but complicated. The main obstacle that you will face is not the loan approval process, but rather finding an insurer willing to offer a policy to someone who cannot legally drive.

Getting The Loan Itself

The loan process does not vary whether you have a driver’s license or not. Lenders all have a set of guidelines that they follow when considering a loan application. Those criteria differ from lender to lender, but usually include:

  • The vehicle having a loan to value (LTV) ratio between 85 and 115 percent.
  • The car must be less than 8 years old.
  • The usual loan term is 36 to 72 months.
  • The vehicle must have less than 100,000 miles.
  • You will need to offer a down payment of at least 10 percent of the total purchase price or $1,000.
  • You should have two years on your job or within the same field.
  • Your monthly gross income should be at least $1500, sometimes $1850 or $2000.
  • With a large lender your credit score will need to be at least 670, but there are specialty lenders who will consider a score as low as 540.

You will need to have a total debt to income(DTI) ratio of  less than 36 percent, including the payment for the loan you are applying for. There are some specialty lenders who will consider a DTI as high as 45 percent, though.

The Insurance Hiccup

The main hiccup for a car owner who has no driver’s license is when they search for insurance. Lenders require borrowers to carry full coverage insurance for the entire term length of the loan. However, the majority of insurers refuse to cover an unlicensed driver. Those that do, only cover for physical damage. If you have a loan on the vehicle, you will need a higher level of coverage than that.

Even if you find an insurer there is one more thing to worry about:  that insurer will not pay for any damage you cause if you happen to drive the vehicle without a driver’s license.

Two Possible Solutions

The easiest solution may be to just get your driver’s license, but, if that is not possible, you have another option. Is there a licensed driver in your home or a close relative that you trust? If so, would they be willing to get the auto loan for you or allow the car to be titled to them? Either would circumvent the insurance issue, but not an insurer’s lack of responsibility if you damage the vehicle while driving without a license, or the legal ramifications of being caught by the police without a license.

On the other hand, if you are trying to finance a car for someone else–for instance, if you don’t have a license but need to finance a car for your child–then you can simply co-sign the loan and make the payments yourself, while putting the title and insurance in the driver’s name.