
Paying full cost for a vehicle is difficult without significant money in your pocket. Instead, most people head to the bank to take out a car loan. Each bank and financial institution sets the requirements for loaning money to interested consumers. Whether or not you need a bank account depends on the bank you choose. There are financial institutions available that loan to consumers without bank accounts.
Scoring the Cash
Banks are mostly concerned with your ability to repay and your history of doing so. All financial institutions require you start the process by submitting an application. The application provides your personal information, including your name, address, employer and wage information. The application provides the bank with the authorization to pull your credit report. You need a stable wage history and a decent credit score. Without both, you are not likely to get an approval -- even with a bank account.
Denied a Bank Account
Poor credit and a previous history of bad checks are the most common reasons for being denied a checking account. If that's your situation, you may run into problems getting a car loan -- not because of the lack of account but rather because car loans use similar criteria for bank accounts as loan applications.
Ditching the Bank
Banks are not the end-all for storing your hard earned-cash. With so many financial alternatives available, many people are opting out of the mainstream banking. According to Forbes, approximately 28 percent of Americans conducted financial transactions outside the banking system in 2012. Your alternatives include check-cashing services, prepaid debit cards, money orders and credit cards. If ditching the bank is a personal choice and not for poor payment history, you may have a chance to score the auto loan.
Drawbacks
Without a bank account, you must find an alternate means of paying your bills each month. You’ll need to mail in payment using a money order or cashier’s check or use a online bill payment program. Using a prepaid debit card may allow you to pay online, but it depends on the specific bank you use. You may also notice more fees in your effort to ditch your bank. Prepaid debit cards, money orders and cashier’s checks come with fees. Your bank may also charge a convenience fee for using a debit or credit card. Many banks are more lenient with existing customers. Using a financial institution you already have a relationship with is more likely to result in an approval. You do not get this benefit without a bank account.
Considerations
If you have sufficient income and credit history, it's likely someone will loan you money for your auto loan. It’s a matter of finding the right lender. Check with your local credit unions and banks first. If you are still running into walls, consider adding a co-signer into the mix. A co-signer uses his income and credit history to secure the loan on your behalf, which also makes him responsible for payments if you default.
References
- Cars.com: Car Loan: What You Need to Get One
- Bankrate: 9 Steps to a Car Loan on Damaged Credit
- Forbes: Who Needs Banks? Number of Americans Without Bank Accounts Rises
- Northwestern Mutual. "Here's the Difference Between Banks, Credit Unions and Brokerages." Accessed April 6, 2020.
- Federal Deposit Insurance Corporation. "FDIC Community Banking Study," Page 1. Accessed April 6, 2020.
- Federal Deposit Insurance Corporation. "Learning Bank - Checking & Savings Accounts." Accessed April 6, 2020.
- Federal Deposit Insurance Corporation. "Five Things to Know About Safe Deposit Boxes, Home Safes and Your Valuables." Accessed April 6, 2020.
- U.S. Bank. "U.S. Bank Mobile App." Accessed April 6, 2020.
- Bank of America. "Bank Account Rates & Fees FAQs." Accessed April 6, 2020.
- American Express Company. "APY vs. APR: The Basics About How Interest Is Calculated." Accessed April 6, 2020.
- The Federal Reserve. "Regulation D1 Reserve Requirements," Page 1. Accessed April 6, 2020.
- Wells Fargo. "Debit Card Questions." Accessed April 6, 2020.
- Investor.gov. "Certificates of Deposit (CDs)." Accessed April 6, 2020.
- Ally. "6 Ways to Avoid Checking Account Fees." Accessed April 6, 2020.
- PNC Bank. "PNC Virtual Wallet Features and Fees," Page 1. Accessed April 6, 2020.
- Bank of Alma. "Checking With Choices." Accessed April 6, 2020.
- HelpWithMyBank.gov. "Answers About Funds Availability: I Opened a New Checking Account, but the Bank Will Not Let Me Withdraw My Funds Immediately." Accessed April 6, 2020.
- ChexSystems. "Frequently Asked Questions (FAQ's)." Accessed April 6, 2020.
- ChexSystems. "Common Mistakes to Avoid." Accessed April 6, 2020.
- Experian. "Why Was I Denied a Checking Account?" Accessed April 6, 2020.
- Consumer Financial Protection Bureau. "Helping Consumers Who Have Been Denied Checking Accounts," Page 2. Accessed April 6, 2020.
Writer Bio
Leigh Thompson began writing in 2007 and specializes in creating content for websites. She has been published online in various capacities. Thompson has an associate degree in information technology from the University of Kansas and is working on a bachelor's degree in business and personal finance.