The Complete Guide to Personal Loans for Uber Drivers
Posted by Frank Gogol
NOTE: In light of the current COVID-19 outbreak in the U.S., emergency funding has been made available by the U.S. Congress. Uber drivers qualify Small Business Association (SBA) loans. To learn more about this, visit the section on SBA loans for Uber drivers below.
The advent of Uber has made decent-paying work accessible to many who might otherwise struggle to find a job. As an Uber driver, all you need is a car and a license and you can get started earning far above minimum wage.
However, there are costs involved in becoming an Uber driver, especially if you don’t have a car, or if your car needs an upgrade. One way that you can cover the upfront costs of becoming an Uber driver is by taking out a personal loan. This article explores loans for Uber drivers, and which options are best suited for you.
Table of Contents
Reasons an Uber Driver Might Need a Loan
One way that Uber differs from other jobs is that you need a piece of equipment, namely a car, that fits certain requirements. Getting the right vehicle can incur substantial costs, as you can see in the section below.
Upgrade Current Vehicle
Uber has certain vehicle requirements that you must meet if you want to qualify for a driving position. First, the car must be less than ten years old. Also, Uber must deem the car as in “good condition,” without any visible blemishes or cosmetic problems. Since this criteria excludes the vehicles of many lower-income workers, prospective drivers must pay to remove damages from their cars, or even buy a new car entirely.
Purchase Car to Become a Driver
Purchasing a newer car is the only option for people who want to become Uber drivers but have cars that are more than 10 years old, or who do not own a car at all. However, many simply cannot afford to cover the cost of a newer car upfront, which is where loans can be helpful.
Loans Available for Uber Drivers
There are multiple loans available for prospective Uber drivers; see the following section for a few options.
Bad Credit Car Loans (Best for Bad Credit)
A bad credit car loan is an auto loan designed for individuals with a relatively low credit score, who might not otherwise qualify. The interest rates on these loans will be higher than a normal auto loan, but the qualifying requirements are much lower. Once you make a certain amount of payments on time, you can refinance your bad credit car loan and obtain regular interest rates.
Secured Car Loans (Best if You Have a Cosigner)
A secured car loan is another option suitable for individuals without the best credit or income. Secured car loans allow you to qualify for relatively low interest rates by using the car as collateral for the loan. Applicants can combine this with a cosigner for a substantially lower interest rate. However, if you miss payments, you may lose the car, which, if you’re an Uber driver, would result in loss of income.
Personal Loan (Best for Immigrants and Visa Holders)
Taking out a personal loan can give you access to larger sums for purchasing a car than a regular auto loan. Many lenders that offer auto loans or bad credit car loans require permanent residency or a Social Security number. Immigrants and visa holders, then, can benefit from a personal loan, since there are lenders which offer personal loans specifically to noncitizens.
How to Get a Loan as an Uber Driver
Applying for a loan is simple and straightforward, and you can receive the funds that you need within a couple of days.
Filling out an application takes only a couple minutes, and involves detailing some important financial and personal information, as well as authorizing a soft credit-pull. If your application meets the minimum eligibility requirements of the lender, then your application will be approved.
Once approved, you will see the range of amounts and loan terms that you qualify for, along with an interest rate. You can choose the amount and term length that best suits your needs, sign a promissory note agreeing to the details of the loan, and the funds will be deposited in your account right away. End-to-end, the process takes as little as 2-3 days, and you will have the funds you need to secure a suitable car for driving with Uber.
Can Uber Drivers Apply for SBA Loans During COVID-19?
UPDATE: The SBA loans fund created by the CARES Act is presently out of funding and no more SBA loans are available at this time.
Under the CARES Act, the Small Business Administration (SBA) created new programs to support small businesses, including those who are self-employed, sole proprietors, or independent contractors, meaning most Uber drivers qualify for these loans.
To learn more about SBA loans for Uber drivers, visit the Small Business Association website.
Use a Loan to Become an Uber Driver
Once you have the funds in hand, you can take all of the steps necessary to become an Uber driver. See the following section for a breakdown of the process.
Buying a Car with a Personal Loan
First, pick a specific car that you plan to purchase with your car loan, or a couple of cars that you will consider, and note the prices. Make sure that you request a loan amount that will supply you with the necessary funds to purchase this car.
Apply to be an Uber Driver
With your car at the ready, now you can submit an application to Uber. Completing an application with Uber is fairly quick, and you can typically pass the background check and start driving within a week.
Meeting Uber’s Car Requirements
If you qualify to become a driver, you then have to make sure that your car meets Uber’s minimum requirements. The main requirements are:
- A vehicle 10 years old or less
- A four-door vehicle, with seating and seatbelts for 4 individuals
- Vehicle must pass a mechanical vehicle examination
Use Your Uber Income to Make Payments
Once your vehicle is certified and you begin driving, you can start earning substantial income immediately. With this income, you can set up autopay and make payments on your personal loan.
Finance a Car through Uber
As an Uber driver, you’ll have quite a lot of driving around to do – but in order to drive that way, you will first need a car. And we all know how expensive cars can be.
The problem here is that you cannot really buy a cheap car when you are an Uber driver – and there are plenty of reasons for that. First, a cheap car will not be able to handle the distances you go for as a driver. It will break down often – which is the last thing that you want when you have passengers.
Second, no one will get into your car if they see you driving a shady vehicle that seems to be taking its last breath. They will not feel safe. This is why you should obtain financing to purchase a new car – and you should also spend some time in finding a good provider.
Uber has obviously had a surge of popularity nowadays – with more people using the application as passengers, and more and more people becoming drivers to reap some benefits out of it. Even with so many people becoming drivers, Uber is not really happy with the numbers. They are trying to lure even more people behind their wheel.
This is how they came up with their (now defunct) financing problem. While it seemed like a great idea in the beginning, this poorly executed program allowed many drivers with bad credit to get a loan – but at great cost.
Why It’s a Bad Idea to Finance a Car through Uber
When looking for financing, Uber’s program seemed like the shiny light at the end of the tunnel. It promised to bring drivers on the path of easy earning – and all they had to do was to take out a loan from Uber, the company that only has only their best interest in mind.
If only. Yes, the Uber lending program was indeed designed to help aspiring drivers get their hands on some hot wheels – but the truth was slightly different, as the program began to reveal its true colors.
Nowadays, you can no longer find the details of the loan on Uber’s website – but according to the NPR Marketplace, the Uber terms were almost impossible to keep, and the price tag was pretty hefty. You could end up paying $1,000 every month for a Kia Optima, and you’d have to pay an interest rate of well over 22%. That’s a fair amount of money to pay for just one car.
Plus, once someone took out a loan from Uber, the payments were automatically taken from their paycheck. This was great if you had a good income from Uber, and low payments to make – but if your income was low and you had a ridiculous payment to make, you’d end up burying yourself in even more debt.
Long story short, the ridiculously high payments and the crazy interest rates set by Uber made it difficult for the drivers to actually gain profit from the job. All they managed to gain was even more debt. They needed the car to get the money – so, if the loan resulted in no money anyway, it beat the entire purpose of the financing.
Are There Uber Approved Lenders?
You’d think that there are Uber-approved lenders around – but in fact, that is not actually true. The thing here is that Uber did not release its financing program just so their clients could go to other companies. They want the borrowers to come to them so that they could reap the benefits that the interest rate gives them.
For this reason, you will not see any Uber-approved lenders – because why would they approve when you could just as easily use their program. While the program was closed in many countries, others still use it worldwide – as well as some U.S. states. As a result, you may use an Uber loan to get a car – but it is not actually that recommended. Not unless you are willing to pay a good part of your income on ridiculously high interest rates.
Options for Financing an Uber Vehicle
All things considered, as an Uber driver, you may still find yourself in need of some financing. You can’t drive with your old car to no end – particularly if you have a shady looking one that would make clients hit “Cancel” before you even have a chance to update the map.
Luckily for you, regardless of the state of your credit, there are several loans for Uber drivers that you may go for – among which are included:
Bad Credit Loans
If you are the unlucky owner of bad credit, you are probably already familiar with the way in which every bank shuts the door on you, rejecting your application for a loan. Since you have bad credit, you are seen as unreliable – so, ultimately, they “don’t give you enough credit” for you to be trusted to pay back. Once someone that misses his payments, always someone that misses his payments.
However, with bad credit loans, you can get a loan even if the bank is not very willing to give you the benefit of the doubt. These lenders generally do not care whether you have good credit or not. They want to know if you have the funds to pay them back.
The problem with these loans is that, since you are considered a “risk borrower,” they charge a fairly high interest rate as security. Considering that you are struggling with bad credit, it’s likely that you are not bathing in money – so, the last thing that you might want now is to get yourself in even more debt.
Dealer Provided Financing
You might also want to go for dealer provided financing. With this option, you can obtain financing straight from the car dealer. The requirements are set between the dealer and the buyer – and the buyer will have to pay that money back over a set period, plus interest.
Bear in mind that since these are private loans between both parties, they can be rather expensive. Unless you are a good negotiator, these are not a very good option for you.
Personal loans can be given for any purpose – so, whether you are taking one to buy a car or to buy one year’s worth of gas for your car, this should be able to prove helpful. Plus, if you find the right lender, there is a fairly good chance that you can obtain a good interest rate – particularly if you throw in some good credit and/or collateral as well.
Are There Payday Loans for Uber Drivers?
Uber drivers are always in need of money. If it’s not to buy gas, then it is to recondition their car. For them to get as many clients as possible, their vehicle needs to be in peak condition – which is why so many people are opting for payday loans.
Seeing the need for these loans, Uber also released a program for small payday loans. When drivers cannot make ends meet with their income, they may sometimes need some extra income to feed themselves or to feed their car. Uber was quick to provide this kind of financing.
The problem with these loans is that, like the bigger car loans, they are also very high-interest. In order to actually be able to pay these loans, with the Uber fares, you would have to work more than 100 hours per week – which is not quite possible.
With loans for Uber drivers, you’ll be getting out of debt by creating a three times bigger debt. Plus, it will give Uber 15% of your income, in a circumstance where it already takes up to 20-25% of the revenue. For many drivers, this is certainly not a good idea.
Driving for Uber is an accessible means of income for immigrants and noncitizens, but the main obstacle for many is getting a relatively new and expensive vehicle. Loans for Uber drivers are a solid option for covering this cost. With a new or upgraded car from a personal loan, you can gain access to a huge income opportunity.