Anyone who tries to get a car loan with bad credit will need to provide references as a part of the financing application. Depending on the lender you are working with, anywhere from three to 10 references may be needed. Similar to business references for a job application, you shouldn't just jot down any name. Consider the following factors when choosing the strongest references for an auto loan.
The Purpose of References
There are two primary reasons references are needed for bad credit auto loans.
First, a lender uses the references to make sure you are who you say you are. Should there be an inconsistencies in the contact or residency information you provide, the people you provide as references may be contacted to clear up those discrepancies.
The other purpose for providing a lender with references is to provide a way of reaching you if you fail to make payments and refuse to respond to collection attempts. Creditors will reach out to every reference until they are able to find you and collect what they are owed.
How to Choose
With the assumption that you want to keep up with loan payments and want to be reachable by your lenders if you fall behind, there are specific characteristics to look for in bad credit loan references. A good reference will be someone you keep in contact with regularly and with whom you plan on staying on good terms. However, it is not recommended that you use people who live with you. Even though someone living with you will most likely know how to reach you, most banks and other lenders prefer multiple contact references for your potential whereabouts.
Another characteristic of a strong loan reference is someone who is able to say good things about your character, and even your financial habits, if the lenders happen to ask before approving your application. Trusted friends and family members that you have good relationships with are often strong choices, as well as long-standing business associates.
Get Permission
You should only use someone as a loan reference if you have their permission. For your purposes, the annoyance and surprise at being contacted by your auto lender could cause a reference to provide incorrect or unflattering information when asked about you and your history.
Strong references can help you get a bad credit auto loan application approved. People you choose as references may be asked to corroborate your personal information or contact you if loan payments are missed. Think carefully about your choices before providing an auto lender with any references.
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