I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.See all posts Frank Gogol
Auto Loans For Non U.S. Citizens
Car is the primary mode of transportation in the U.S. Unfortunately, most people aren’t in a position to just outright purchase a car from savings or general income either. In this case, many people will need an auto loan.
Although it might be a little trickier to get an auto loan if you are an H1B visa holder (as opposed to a permanent resident), auto loans for non-U.S. citizens are available. We have addressed the issue of getting an International Student Car Loan here. We provide more details if you are an H1B visa holder below.
3 Requirements for an Auto Loan as a Non-US Citizen
Buying a car in the U.S. is possible if you are an H1B visa holder. The process to get one might just be a little lengthier. Below are the three requirements for auto loans for non-U.S. citizens.
You Need a Driver’s License
You can apply for a U.S. driver’s license if you are staying in the U.S. on a long-term basis (even if the person in question is an H4 visa holder). You don’t need to be a permanent resident or U.S. citizen. You can apply for your driver’s license at your local Department of Motor Vehicles (also known as the DMV).
You will need the following documentation to apply for a driver’s license:
- Form DS 2019
- Form I-94
- Your passport with your visa
- Proof of our legal presence or residence in the U.S
- Your Social Security Number or Form SSA-L676
- Other state-specific documentation
You Need Auto Insurance
To get an auto loan, you will need to have auto insurance. Having auto insurance is a requirement for all drivers under U.S. law. Generally, you can sign up for auto insurance prior to picking up the car. In some states, you might even need auto insurance before you can get your driver’s license. Fortunately, it won’t be too difficult to get auto insurance – even if you aren’t a U.S. citizen.
You need an Auto Loan
This might feel like the typical chicken and egg question which comes first. But, if you’re serious about getting a car, the seller will probably want to see some sort of proof that you can back the deal. This is where a pre-approved auto loan or letter stating that you will be able to one.
Most people don’t have the finances to buy a car outright and will need the assistance of an auto loan. Unfortunately, if you are not a permanent resident or U.S. citizen this will be the most tricky step. Most people can simply just apply for a loan while at the dealership, but this is not the case for foreign nationals.
Most banks and conventional credit institutions don’t offer auto loans for non-U.S. citizens due to the risk involved. Fortunately, there are institutions like Stilt that specialize in it. With Stilt, you don’t need a social security number, and many of the common issues you will face when applying for an auto loan for non-U.S. citizens can be avoided by using Stilt’s services. Stilt offers personal loans for non-U.S citizens which you can use to buy your car.
Documents Required for an Auto Loan as a Non-US Citizen
The documentation you’ll need to get your auto loan differs from state to state and will also depend on the institution at which you apply for your loan. So it will probably be easiest to make sure you have most of the common ones at hand.
Finance Qualification Form
As a foreign national, you will most likely not have a credit score or comprehensive credit history. So, you will have to provide the lender with other information such as your employment, former credit history, living arrangements, and financial situation, so that they can assess the risk involved in giving you a loan.
Proof of Income
As a non-U.S. citizen, you are likely in the U.S. on a work visa or an international student visa. The lenders will need proof of income to determine the loan amount and repayment terms. If you have recently arrived in the U.S. and have not started your job, the lender will verify your employment and start date. They may want to directly contact the employer to verify this information.
Generally, all auto loans require a down payment to get the loan. As a foreign national, you may be required to provide a higher downpayment to qualify for the loan or to get lower interest rates. The downpayment also depends on the type of car you are buying. New cars have lower downpayment requirements compared to used cars.
You will need to provide the lender with your visa so that the lender can verify how long you intend to stay in the U.S. If your visa is going to expire soon, chances are they won’t provide you with a loan.
Letter from Employer
Lenders will want to know the details of your employment since your employer will provide the funds to repay the loan. The letter should detail your employment status, benefits, salary, and employment term.
This will be documents such as your utility bills, phone bills, medical and/or life insurance documents, etc.
Proof of Lawful Presence
These will be the documents proving that you live in the U.S. legally. An easy one is your visa, but other documents include:
- your driver’s license
- employment authorization document
Can I get an International Student Car Loan?
If you are a foreign national studying in the U.S., you may also be able to get an auto loan. We explain more details about getting an International Student Car Loan here.
Alternative Options to Buy a Car as a non-U.S. Citizen
If you are unable to get an auto loan from a bank, you can try a couple of other options to buy a car.
Below are 2 such options:
If you are unable to qualify for an auto loan for a new or a used vehicle, you can try to get a personal loan. They are unsecured loans that don’t require a collateral but are more expensive. Below are the pros and cons of buying a car with a personal loan:
- Flexibility in Vehicle Choice: Personal loans aren’t restricted to specific types or ages of vehicles, unlike some auto loans. This means you can buy any car you like, new or used, from a dealer or a private seller.
- No Collateral Required: Personal loans are typically unsecured, meaning you don’t have to use the car as collateral. This reduces the risk of losing your vehicle if you default on the loan.
- Simplified Ownership Process: Since you’re buying the car outright with the loan funds, you won’t have any restrictions or requirements from a lender specific to an auto loan, like mandatory comprehensive and collision insurance.
- Potential for Lower Insurance Costs: Without the requirement to carry full insurance coverage as demanded by most auto loan providers, you might have the option for less expensive insurance.
- Higher Interest Rates: Personal loans usually have higher interest rates compared to auto loans, which means you might end up paying more over the life of the loan.
- Shorter Repayment Terms: Personal loans often have shorter repayment periods than auto loans, leading to higher monthly payments.
- Credit Score Impact: If your credit score is on the lower side, you might face higher interest rates or even difficulty in getting approved for a personal loan.
- Total Loan Cost: The higher interest rates and potential for additional fees can make a personal loan more expensive overall compared to an auto loan.
- Budgeting Challenges: The higher monthly payments due to shorter loan terms can strain your budget, especially if you’re not prepared for the increased financial commitment.
In summary, while a personal loan offers more flexibility and doesn’t require collateral, it often comes with higher interest rates and shorter repayment terms, which can make it a more expensive and potentially budget-straining option compared to traditional auto loans. It’s important to weigh these factors against your financial situation and needs before deciding.
Using a credit card to purchase a car can be an option, but it comes with its own set of pros and cons. It’s important to carefully consider these before deciding to use a credit card for such a significant purchase.
- Rewards and Points: If your credit card offers rewards, cash back, or travel points, making a large purchase like a car could accumulate significant rewards.
- Purchase Protection: Many credit cards offer consumer protections like extended warranties, return protection, and purchase insurance which could be beneficial.
- Immediate Ownership: You can buy the car outright, avoiding the need for loan approval and the associated paperwork.
- Potential for 0% APR: If you have a credit card with a 0% introductory APR offer and you can pay off the balance before the promotional period ends, you could potentially save on interest.
- High Interest Rates: Credit cards typically have higher interest rates compared to auto loans or personal loans. If you can’t pay off the balance quickly, the interest can make the car significantly more expensive.
- Credit Score Impact: Carrying a high balance relative to your credit limit can negatively impact your credit score. This is especially true if the purchase utilizes a large portion of your available credit.
- Transaction Limits: Many credit cards have a daily or transaction limit, which might be lower than the price of the car. Not all dealerships accept credit cards for car purchases, or they may limit the amount you can charge.
- Potential Fees: Some dealerships might charge a fee for credit card transactions, which can add to the overall cost of the car.
- Reduced Negotiation Leverage: Paying with a credit card can sometimes reduce your ability to negotiate a better price, as dealers might prefer cash, check, or financing options.
- Lack of Auto Loan Benefits: You miss out on the potential benefits of an auto loan, such as lower interest rates and longer repayment terms.
In conclusion, while using a credit card to buy a car can offer rewards and immediate ownership, it also carries risks like high interest rates and potential negative impacts on your credit score. It’s crucial to assess your financial situation, the terms of your credit card, and the total cost implications before making this decision.
- Getting a Car Loan Without Credit History
- Car Financing With a New Job
- How to Remove a Cosigner from a Car Loan
- How to Get an Auto Loan Without an SSN
- Personal Loans as Auto Loan Down Payments
Being an H1B visa holder doesn’t mean you have to be stuck or immobile. If you don’t have proper access to public transport, consider buying a car while you are in the U.S. If you need an auto loan to make buying a car possible don’t worry! Companies like Stilt is here to help with its personal loans for non-U.S citizens!