If you are considering purchasing a new or used car, you will probably need to obtain a car loan to complete the transaction. Before you head off to your local car dealerships, it is worth your time to ensure you have everything you need to apply for a car loan. There are several things lenders will review when making their decision to approve or deny auto loans.
- Source of Income – You will need to prove you have the ability to pay for the loan. In most cases, you need to provide at least four weeks’ worth of pay stubs to show steady employment. If you are self-employed, be prepared to provide checking or savings account statements, tax returns, or other supporting documentation.
- Proof of Residency – You need to provide documentation showing where you live so lenders will know where to find you, should you encounter financial difficulties are not able to make your regular monthly payments. Normally billing statements from credit card companies or utilities are acceptable, or your lease agreement if you are renting.
- Details About the Vehicle – The lender will need to know information about the car you want to purchase. Be prepared to provide the make, model, year, and mileage on the vehicle if you have already been shopping and know which vehicle you want to buy. Otherwise, you can simply let the lender know you are getting pre-qualified before you select a vehicle.
- Proof of Full Coverage Insurance – Before you can drive the car home, the lender will require you to have full coverage insurance on the vehicle. Most insurance companies can provide a temporary binder that covers the vehicle for a few days, while you finalize the paperwork with your provider and obtain the insurance card.
- Documentation for Your Trade-in Vehicle – If you are trading in your current vehicle, you need to have the car’s title—even if it still has a loan—and proof of registration. Most dealers can assist in transferring the license plate to the new vehicle and supplying you with a new registration, as well as transferring the title out of your name and ensuring any existing loan is paid in full.
Keep in mind, this is only a generalized list of requirements. In cases where you have poor or bad credit, or are just starting out with no credit history, there are often additional things you will need to secure a car loan, such as a down payment or a co-signer.
In addition, your credit score does have some standing when determining your ability to qualify for a car loan. Good credit scores translate to lower interest rates, while poor credit scores result in a higher interest rate. If you are not sure whether you could qualify for a car loan, the best place to start is to talk to a representative from The People’s Federal Credit Union and get their advice. We can pre-approve you for a loan in advance, so when you walk into a dealership you know how much and what interest rate you qualify for. Please feel free to stop by your nearest branch office or contact us at 806-359-8571.