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If you need vehicle financing to buy the car of your dreams, you have some homework to do. Lenders will require documentation on you, your employment and the vehicle. To make the duanting task of financing more seamless, organize this documentation ahead of time.
- Before applying for an auto loan, it is important to gather necessary paperwork to make the process runs smoothly.
- Financial and personal documention provide lenders with the assurance and confidence you will pay off your loan.
- You will need specific vehicle and insurance documentation in order to gain approval for the loan.
Commonly used auto loan documents
When you apply for an auto loan, the lender may ask you to provide proof of the information you give. Here’s a quick breakdown of the key documents you will need and what they mean.
Proof of income and employment
When you are applying for an auto 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 still might be able to show proof of income for auto financing. If you have rental property income or investment earnings, bring documentation illustrating them. Your lender will look at your total documented income, available cash and credit history when determining your loan amount and rates.
You can present 1099 forms, if relevant. Other options include bank statements and current profit and loss statements.
Personal details to pull credit history
Each time you apply for a loan, you will have to supply detailed information about yourself. This information is used to pull credit reports that 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 applicable.
- Date of birth.
- Social Security number.
- Phone number.
Proof of address
When you are applying 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.
Usually, you must show two papers that give the lender the same information. One is typically a utility bill; the other can be a bank statement or recently 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 likely also require collision and comprehensive insurance since you’re buying a car with a loan. This is to ensure you can repair or replace the car in the event of an accident.
Your proof of insurance should include your name, the insurance company name, NAIC number and your policy number.
Along with all of your personal information, you will want to gather 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 your loan process and the rate you get. You should take the following steps when filling out your application.
- Fill out the application completely and accurately. When completing your application, be sure to include all of the requested information, even if it doesn’t initially seem important.
- List all sources of income that you may rely on. Income verification is a common part of the auto loan application process and, as previously mentioned, can include bank statements, W-2 forms, 1099 statements and pay stubs.
- Avoid outside funding for your down payment. It is recommended not to use your home equity or other loans to help fund your down payment. The lender will want to see that you have the cash needed to purchase the vehicle.
- Consider add-ons. Decide which add-ons you want and if you want to roll them into your loan. In addition to your down payment and the sale price, there are a number of additional fees that you will need to factor in if you choose add-ons and don’t pay for them outright.
- Read carefully. The auto loan agreement is a legal document; you need to read it before signing it.
- Make copies. It is always a good idea to keep copies of all loan documents in a secure place.
Securing an auto loan takes time, but being thorough means not getting your application denied for a mistake. Having your information and financing lined up before buying a car also simplifies the loan process.