Applying for a car loan can be a daunting task, but it doesn’t have to be. By preparing the necessary documentation in advance, you can ensure that the process goes smoothly.
Commonly Used Auto Loan Documents
When you apply for an auto loan, the lender may ask you to provide proof of the information you provide. Here’s a quick breakdown of the main documents you’ll need and what they mean.
Proof of income and employment
When applying for a car loan, you will need to provide proof of your income. The lender must see proof, such as a W-2, tax return, or pay stub that shows your income as well as contact information for your employer. You will still need to show proof of employment if you are self-employed, usually in the form of a tax return.
If you are not employed, you may still be able to show proof of income for car financing. You might have a partnership that earns money, such as rental income or investment income. Your lender will consider your total income, available cash, and credit history when determining your loan amount and rates.
Personal data to extract credit history
Each time you apply for a loan, you will need to provide detailed information about yourself. This information is used to pull credit reports which are then analyzed to determine if you are a good candidate for the loan and to calculate your loan rates. These details include your:
- Name and previous names, if any.
- Date of Birth.
- Social Security number.
- Phone number.
Proof of address
When you apply for a car loan, the lender will ask you for proof of address. This can be done using official documents with your name and address.
Usually you have to show two documents that give the lender the same information. One is usually a utility bill and the other can be a bank statement or a recently postmarked letter. Other documents you might provide include a pay stub or a copy of your lease or rental agreement if you have one.
Proof of insurance
The lender wants proof that you have liability insurance and will likely require collision and comprehensive insurance since you are buying a car with a loan. This is to ensure that you will be able to repair the car in the event of an accident. Your proof of insurance must include your name, the name of the insurance company and your policy number.
In addition to all of your personal information, you will want to gather the following vehicle specific information if you have it.
- Vehicle Identification Number (VIN).
- Make, model, year and finish of the vehicle.
- Current mileage.
Tips for completing an auto loan application
The time you spend completing your auto loan application will have a significant impact on your loan process and the rate you get. You must follow the following steps when completing your application.
- Complete the application completely and accurately. When completing your application, be sure to include all of the requested information, even if it may not seem important at first.
- List all sources of income that you can count on. Income verification is an integral part of the auto loan application process and, as mentioned earlier, can include bank statements, W-2 forms, and pay stubs.
- Avoid outside financing for your down payment. It is recommended that you do not use your home equity or other loans to help fund your down payment. The lender will want to see that you have the money to buy the vehicle.
- Consider supplements. Decide what add-ons you want and whether you want to incorporate them into your loan. In addition to your down payment and the sale price, there are a number of additional costs that you will need to consider if you choose add-ons and do not pay for them directly.
- Read carefully. The auto loan agreement is a legal document, and you must read it as such before signing it.
- Make copies. It’s always a good idea to keep copies of all loan documents in a safe place.
The process of getting a car loan takes time, but being thorough means not having your application denied for a mistake. Having all your information together and getting financing before buying a car also simplifies the loan process.