Once the car shopping bug bites, your focus is on finding the car you want and getting it home. Gathering copies of personal records doesn’t exactly heighten the joy of the hunt, but it will be necessary if you intend to get a car loan. This checklist can at least minimize some digging and expedite the process with your lender. If you’re wondering what you need to get a car loan, this guide will outline the requirements for an auto loan. Here’s how to finance a car.
Documents requirements for a car loan
What do you need for a car loan? Good question. Here’s your car loan checklist, so you can have everything ready before you go shopping for your new car.
Proof of identity
Among the requirements to finance a car, you’ll need proof of identity. Even if your car loan is from the same place you’ve banked for years, you’ll still need to prove who you are. Prepare to give your Social Security Number (SSN) also, as your driver’s license and SSN are two of the main ingredients for generating a credit check.
Proof of residence
Yes, it’s on your driver’s license, but the lender needs to know whether it’s your current address. Grab a recent utility bill for them to confirm if asked. Also, if you’ve been at your address less than a few years, you may have to furnish previous address details.
Proof of employment and income
It’s only fair that a lender have a little information on how you intend to get the money to pay them back. Recent pay stubs and your employer’s contact number will come in handy. If you’re self-employed, this ordinarily means copies of tax returns from the last two years.
Credit and banking history
The requirements for car loans tend to include your banking information, which includes a credit check. The bank giving you a loan can easily obtain this information with the documentation you provide.
Down payment details
Your lender may require documentation about the down payment on your new car, since that will ultimately affect the amount of the loan. Some lenders may require a certain amount for a down payment to grant the loan.
Proof of insurance
With a car loan, you’re technically proposing the lender buy a car and let you drive it in exchange for payments. They want their investment protected, so they want proof that you are insured. If you do not already have car insurance, they may give you a small window to obtain it or they will secure it with a policy themselves and forward the bill to you.
Seller information
Whether a dealer or private party, the lender needs this information and will probably contact them prior to loan approval. If you seek pre-approval, you will need to provide seller information as soon as you’ve settled on the car you want.
Car details
If you first obtain pre-approval, be prepared to give this information once you find “the one.” Specifics include the vehicle year, make, model and vehicle identification number (VIN). Lenders often have restrictions or different interest rates depending on these details. You might also need to have the lender look over the car to note its general condition and rule out any existing damage. That shouldn’t be too big a bother, since we all like to show off our new cars anyway.
Cosigner details
After years of general financial shakiness, cosigners are no longer just for first-time buyers or those with sketchy credit. Depending on the car you want and how much you intend to borrow, you may be asked for a cosigner even if your credit is generally good. On the bright side, if you know and are trusted by someone with excellent credit, having them cosign, even if the lender doesn’t require it, may help you qualify for a lower interest rate.
Emergency contact details
This can be a polite way of the lender asking who they can call to track you down if you miss a payment and don’t answer the phone. Nothing personal, it happens. Even if payments stay current, folks change addresses and phone numbers, but don’t always remember to update the lender if it’s not their primary financial institution.
Trade-in documentation
If you’re trading in your car toward your new car and you’re financing your new car through the dealership, the dealership’s sales team will take care of the down payment paperwork for you. However, if you got the loan through your bank, they might require information about your trade in. Keep in mind, too, that if you have a loan on your trade in, you’ll need this information to ensure the loan is properly paid off and the account is closed.
Frequently Asked Questions
What does your credit score need to be for a car loan?
Wondering what credit score you need for a car loan? According to experts, most auto loans are granted to people with a credit score of at least 661. However, requirements can vary by lender, and people with a higher score generally qualify for better rates.
How does getting a loan for a car work?
There are different car financing options to get a loan for a car. If you’re buying a car from a private seller, you’ll need to get a loan through your bank. If you’re buying a car from a dealership, you can either use the dealership’s financing or get a loan from your own bank. In either case, the lender will have its own requirements for credit history, income verification, and other documentation.
What items are needed for a car loan?
The documents needed for a car loan may vary by lender, but generally consist of documents that verify your identity and income, proof of insurance, and information about the car you plan to buy.
How do I qualify for a car loan?
Generally, a credit score of 661 or higher is required to qualify for a car loan, along with proof of employment and income.