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 key documents you'll need and what they mean.
Proof of income and employment
When you apply for a car loan, you will need to prove your income. The lender needs to see proof, such as a W-2, tax return, or pay stub that shows your income along with your employer's contact information. 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 auto financing. You may have a partnership that generates cash, such as income from rental properties or investment earnings. Your lender will look at your total documented income, available cash, and credit history when determining your loan amount and rates.
Personal details to pull credit history
Every time you apply for a loan, you will need to provide detailed information about yourself. This information is used to obtain credit reports that are then analyzed to determine if you are a good loan candidate and to calculate your loan rates. These details include your:
- Name and previous names, if applicable.
- Date of birth.
- Social Security number.
- Phone number.
Proof of address
When you apply for a car loan, the lender will ask for proof of your address. This can be done using official paperwork with your name and address on it.
Generally, you must show two documents that give the lender the same information. One is usually a utility bill and the other can be a recent bank statement or postmarked mail. Other documents you could 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 probably also require comprehensive and collision insurance since you are buying a car with a loan. This is to ensure that you will be able to repair or replace the car in the event of an accident. Your proof of insurance should include your name, the name of the insurance company, the NAIC number, and your policy number.
Along with all of your personal information, you'll want to collect the following vehicle-specific information, if you have it.
- Vehicle identification number (VIN).
- Vehicle make, model, year and trim.
- Add-ons, such as premium sound.
- Current mileage.
Tips for completing an auto loan application
The time you spend completing your auto loan application will have a significant impact on the process of your loan and the rate you get. You must follow the steps below when completing your application.
- Fill out the application completely and accurately. When completing your application, be sure to include all requested information, even if it may not initially seem important.
- List all sources of income you can rely on. Income verification is a common part of the auto loan application process and, as mentioned above, can include bank statements, W-2 forms, 1099 statements, and pay stubs.
- Avoid outside financing for your down payment. It is recommended that you do not use home equity or other loans to help finance a down payment. The lender will want to see that you have the cash to purchase the vehicle.
- Consider plugins. Decide which add-ons you want and whether you want to include them in your loan. In addition to your initial payment and the selling price, there are a number of additional fees you'll need to consider if you choose add-ons and don't pay for them outright.
- Please read carefully. The auto loan agreement is a legal document and you should read it as such before you sign it.
- Make copies. It's always a good idea to keep copies of all loan documents in a safe place.
The process of obtaining an auto loan takes time, but being thorough means your application won't be denied by mistake. Having all of your information together and financing lined up before you buy a car also simplifies the loan process.