How Do I Get a Non-Recourse Car Loan?

Whenever you obtain a car loan, the car is the collateral for obtaining the loan. This means that if you default on the loan, the lender has the right to repossess the car. When you have a recourse loan, this does not mean that the lender won't still come after you for the payments you owe on the car. When you have a non-recourse car loan, however, once the car is back in the lender’s possession, the lender no longer comes after you for any further payments on the vehicle.

You can typically get a non-recourse car loan directly from a used car dealership. These types of loans are not typically offered by traditional dealerships for the purchase of new vehicles or from banks or car financing companies. Because a non-recourse car loan is a risk to the lender and less of a risk to you as the borrower, these loans typically come with a higher interest rate on the loan, and generally require that you put a higher down payment on the purchase of the car.

To obtain a non-recourse loan, visit the dealerships in your area that offer their own financing options. Inquire as to whether or not a non-resource car loan is one of the financing options the dealership offers. If so, you will first need to identify which car you want to finance. Once you have identified the car and negotiated the price of the vehicle, the dealership will have you complete a financing application.

The lender will pull your credit. The credit score may also determine how much of a down payment the dealership will require for you to obtain a non-recourse car loan. The goal of the dealership is to limit its loss if in fact it has to take back the car if you default on the non-recourse loan. In general, the non-recourse loan will be for an amount that is less than what the car is actually worth, which is how the dealership limits its loss.

If the dealership is not able to provide the non-recourse loan, there are financing companies that deal with bad credit borrowers or borrowers that are not able to obtain traditional car loans. The financing companies require the similar steps to the dealership. You can either get pre-approved for a non-recourse car loan, or pick out a car first and then have the financing company work with you and the dealership to complete the deal.