Getting an auto loan with a good credit score might be easy but, how about someone with no credit or bad credit history? It can be a little tricky as the lender cannot measure your credit score and thus, determine your creditworthiness in a positive light. However, all is not lost.
With a stable income source and solid financial statements, you can get guaranteed auto loan approval. You can divide the loan approval process into three simple steps:
1) Completion of the online auto loan application process.
2) Submission of the supporting documents.
3) Thirdly, waiting for loan approval.
Dealing with Auto Loan Documents
Every lender has slight variations in loan requirements. The criteria may vary, but documents related to debt payments, income, and credit score are the top things that a lender would ask. Here is the list of all documents that you may require while getting an auto loan.
1. Proof of Identity: By law, lenders need to confirm customers’ identification with the help of a driver’s license, passport, or any other government-issued identity proof having a name and photograph. A valid driver’s license in the state of your residence is a must if you plan to drive your car.
2. Proof of Income: Most lenders will require income proof that shows that the borrower can make auto loan payments. This requirement can be satisfied by providing recent pay stubs, year-to-date income details, tax returns, and bank statements. Ideally, submit two years of tax history and the last three months’ bank statements. In some cases, lenders will call employers to confirm employment and income.
3. Personal References: In addition to a cosigner, lenders will ask for a few references. It is helpful, especially when you cannot pay your bills or even when the lenders cannot contact you. The lower the credit score, the higher will be the number of references that you will need. Provide the full name, address, and phone number of the people you want as your references.
4. Credit and Financial History: Lenders check your current and past financial record, debt-to-income ratio, and credit score. Lenders will check if you have late payments or unpaid bills on your credit score, especially if your DTI (Debt-to-Income) ratio is low.
5. Vehicle Information: If buying a used car, the lender will ask for the vehicle’s purchase price, Vehicle Identification Number (VIN), year, make, model, and other related documents.
6. Proof of Insurance: You need to insure your car as per state law. The lender will check if you are adequately covered before they approve your loan. If you pay a regular insurance premium, you will need to show the documentation. If not, you will have to call the insurance company and secure it.
7. Trade-In Documentation: While trading in your existing car, the lender will need the registration papers and title to check the worth of your vehicle. It will help them in ascertaining your LTV (Loan-to-Value) ratio.
Even if you have an excellent credit score, lenders still need certain documents before approving your loan. Lenders refer to them as stipulations. The lower the score, the more stipulations you will need to provide to the lenders. Additionally, you can secure guaranteed auto loan approval with the help of a down payment.
Whether you are looking at a new vehicle or a used car, the risk for the lender remains the same. So, you must keep all the information ready for guaranteed approval and make car buying faster.