As a responsible adult, you know that having your own car is important. Not only does it provide you with reliable transportation, but it also gives you peace of mind knowing that you’re always able to reach your destination. If you’re in the market for a new or used car, but don’t have the cash to buy one outright, don’t worry – you can still get behind the wheel by getting a car loan. But what are the requirements? Keep reading to find out.
When you apply for a new car loan you’ll need certain documents to prove things, such as your income and your address. Here are the documents you need to get a car loan:
1. Proof of Income
To ensure that a borrower can make his auto payment, most lenders want proof that he is actively earning income. Submitting a pay stub that is less than a month old and demonstrates your year-to-date income is the best way to meet this criterion.
You’ll need tax records and bank statements if you’re self-employed. Lenders typically require two years of tax returns, but they may request up to five; you’ll also need bank statements from the previous three months.
2. Proof of Residence
On the car loan application, a lender must verify your address. You can show that you live there by presenting a utility bill or any other official documents that you get at your present address. If you plan to drive away with a car, you’ll also need to provide a valid driver’s license.
3. Proof of Insurance
Because all cars on the road are required by law to be insured, the lender must know that you have enough coverage before granting you a car loan. Bring proof of insurance if you have already purchased it.
If you don’t have insurance, you should be able to get it by calling an insurance company from the dealership. You won’t be able to search around for the best policy rates from other lenders if you finance through the dealer. If you have a solid relationship with your bank, you may be able to acquire a better car loan rate with a preapproved vehicle loan than you would with a dealership loan.
You must present documentation of your identity in order to obtain a car loan. A photo ID with your signature, a current utility bill in your name with the same address as your ID, and two months of bank statements are all required. A passport, a government-issued card such as a Medicare ID, stock certificates, and titles to a home or other vehicles are all acceptable forms of identification.
5. Credit and Financial History
Lenders are interested in your present and previous financial circumstances, such as your current debt-to-income ratio — the percentage of your monthly gross income that goes toward debt repayment — as well as your credit history and credit score.
You won’t need to carry anything because the lender will have access to this information if you provide your basic personal information and consent. Just keep in mind that the lender will look at your present and previous debts.
6. Vehicle Information
You’ll need a lot of information on the vehicle you’re buying if you’re applying for a used auto loan. The vehicle’s purchase price, identification number, year, make, model, mileage, original title, and any liens on it will all be required by the lender.
The “used car rule” normally requires the car dealer to supply you with a complete buyer’s guide for the vehicle you’re purchasing. This guide includes all of the information you’ll need to apply for a car loan, as well as information on your rights and duties. Before you sign on the dotted line, you should read through the entire guide and make sure you understand everything.
7. Trade-in Documentation
If you’re trading in a car, you’ll need the title and registration paperwork, as well as any additional documents that may assist the lender in determining the value of the trade-in vehicle. Because the value of the vehicle will affect the amount of financing you receive, bring these items with you to streamline your loan.
8. Down payment methods
When it comes to making a down payment on a car, be prepared with your method of payment. This may include:
- Personal check
- Cashier’s check
- Credit card
- Debit card
- Pre Approved loan
- Personal loan
If you want to use a credit or debit card, ask the dealer to be sure they will accept this form of down payment and if there’s a cap on how much can be charged.
Applying for a car loan can be a stressful process, but it doesn’t have to be. By understanding the requirements and gathering the necessary documents, you can make the process smoother and less time consuming.