Images by Getty Images; Illustration by Austin Courregé/Bankrate
Key takeaways
- Before applying for an auto loan, gather necessary paperwork to make sure the process runs smoothly.
- Financial and personal documentation provide lenders with the assurance and confidence you will pay off your loan.
- You will need specific vehicle and insurance documentation in order to be approved for an auto loan.
If you need vehicle financing to buy the car of your dreams, you have some homework to do. Lenders will require documentation about you, your employment and the vehicle. To make the task of financing more seamless, organize this documentation ahead of time.
What documents do you need to finance a car?
When you apply for an auto loan, lenders will ask you to provide proof of your income, employment and overall finances. This typically involves submitting an application with attachments, if necessary.
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.
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.
What should self-employed borrowers provide as proof of income?
You will still need to show proof of employment if you are self-employed — usually in the form of a tax return. 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 to determine if you qualify and to calculate your loan rates. These details include your:
- Name and previous names, if applicable
- Date of birth
- Social Security number
- Address
- Phone number
Proof of address
Lenders will ask for proof of your address, which is typically any official or legal document that also includes your name. Your lender will specify what proof it accepts.
Utility bills, bank statements or recently postmarked mail are common options. 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
You may be required to provide proof of insurance when you apply, although it may not be necessary during the initial preapproval or application process. When the lender does request it, you may need to provide proof of liability insurance, and collision and comprehensive insurance may also be required.
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.
Vehicle information
Depending on where you are in the application process, your lender will need to know specific details about the vehicle your are financing. This includes:
- Vehicle identification number (VIN)
- Vehicle make, model, year and trim
- Add-ons, such as premium sound
- Current mileage
- Any add-ons, such as premium sound
Like proof of insurance, lenders may not need vehicle information until you have a vehicle picked out. In general, you will have 30 days to shop after applying for preapproval or prequalification.
Current vehicle registration
If you plan on pursuing dealership financing and want to trade in your car as part of the transaction, you may need to bring in its current registration. This proves that the vehicle belongs to you and lists any liens, if applicable. You may also need to bring in the loan payoff amount and other documentation if you don’t own your car outright.
The dealership should be able to provide a list of what it needs from you. Go over it carefully so you don’t miss a step during the financing process.
Down payment
Similarly, you may need to provide proof of your ability to make a down payment to your lender. Be prepared to pay at least 10 percent, but preferably 20 percent, of the final sale price when you buy a car, whether you choose dealership financing or financing from a bank or online lender.
Tips for completing an auto loan application
Applying with multiple lenders and preparing your documents may have a positive impact on your loan process and the rate you are quoted. When you’re ready to submit an application, follow these steps to make the most of your auto loan:
- Fill out the application completely and accurately: When filling out your application, provide all of the requested information, even if it doesn’t initially seem important. This will likely include income verification through bank statements, W-2 forms, 1099 statements and pay stubs.
- Avoid financing for your down payment: It is generally not recommended that you use your home equity or other loans to help fund your down payment. Lenders will want to see that you have the cash needed to purchase the vehicle.
- Consider add-ons: Decide which add-ons you want, if any. And while it may be convenient, don’t roll them into your loan. Most add-ons can be purchased through a third party for much less — and you won’t pay interest if you cover the cost out-of-pocket.
- Read carefully: The auto loan agreement is a legal document. Read it before signing, and if you are financing through a dealership, be sure to check for common dealer tricks.
- Make copies: Keep copies of all loan documents in a secure place. Think about saving both physical and electronic copies so you can reference them as needed when paying off your loan.
If you opt for dealership financing, there are multiple dealer fees that you can avoid or negotiate. “You don’t want fees to be part of your loan,” Brian Moody, executive editor at AutoTrader, says. “Even if it means you a little more money upfront, it’s a better value to not pay interest on fees regardless if they are required or optional fees.”
Next steps
Documents are only one part of the application process. To get the best auto loan rates, you should compare at least three lenders. This will help you determine what documents you should need — and shop with confidence once you know your rate.
In addition, determine how much car you can afford. Negotiating the total cost, rather than monthly payment, will help you save money. Securing an auto loan takes time, but being thorough will help you avoid having your application denied over a preventable mistake.
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