Do you want your car loan application to get approved?
Getting yourself a car gives you a degree of convenience you never knew you needed. It gives you a means of traveling whenever you wish, and it helps you cut down on transportation costs overall. The only problem is that a lot of people can’t cover the costs of a car right off the bat.
Car loans exist to help individuals secure a vehicle for themselves as they pay off the cost of a car over a period of time. It’s a great way of securing the car you want, but you run the risk of getting rejected if you’re not well prepared.
Knowing the loan application process and getting everything in order raises the chances of approval. To help you out, we’ve put together a small guide below. Read on and get the best deal available for you!
Proof of Identity
The first thing you should get in order is your proof of identification. Federal law requires lenders to confirm the identity of their customers. Any government-issued ID like passports or driver’s licenses is often what most people present.
If you’re unable to provide any form of identification, then you can always provide a reference. These must be reputable sources, like a credit reporting agency, or your employer.
Speaking of, if you’re taking applying for a car loan as a business, then you’ll need to present your EIN. The Employer Identification Number will show that your employer is more than capable of paying off the loan. Lenders may also ask to see a business license before proceeding.
For an online loan application, you can scan your ID and upload it to their website. Make sure it’s a government-sanctioned ID to prevent further complications.
Proof of Residence
You’re also required to present proof of residence. This is to verify the other documents that you’ll present later on. This makes it important that you immediately update your documents if you’ve recently moved.
In this case, you can still provide lenders with other documents to verify your residence. You can present last month’s utility bills, your bank statement, or even your lease agreement. These documents need to provide the needed information, mainly your name and the address.
Lenders will also ask you to provide some information about your current address. They’ll also ask to see your driver’s license if you intend to drive the car out of the dealership.
Proof of Income
Nowadays, Americans owe more than $1.2 trillion to auto loans. A part of this is because borrowers didn’t have a secure source of income before. This is why proof of income is now a mandatory requirement when applying for any loan.
This shows the lender that you have a stable source of income that can provide you with consistent payments. While commission-based jobs aren’t frowned upon, lenders are wary about the consistency of your paychecks. This can affect your chances of getting approved if you’re asking for a large sum to borrow.
Lenders will also take a look at your monthly expenses. This is to gauge how much is leftover from your paycheck. They’ll use this to determine whether they can trust you in paying back your loan.
To make this easier on yourself, collect your recent pay stubs. This will more accurately reflect how much you earn per payday. It’s an easier way for lenders to calculate how much you make in a year.
Credit History
This is the most important part of your loan application. Lenders will ask you for your Social Security number along with other bits of information. This is so they can look up your credit score.
This will determine the interest rates they’ll put on your loan. The higher your score is, the lower the interest rates will be. They have faith in your financial responsibilities to trust you with low rates.
On the other hand, they’ll place higher interest rates if your credit score is low. This is to get you to pay your loan back as soon as possible. The longer it takes you to pay it back, the more you’ll end up paying in the end.
If you have bad credit, you can consider getting a title loan. These ignore the borrower’s current credit rating. You’ll temporarily give up the title to the vehicle, instead.
This allows the lenders to claim the vehicle if you can’t pay the loan back. You’ll need to know what to consider when getting a title loan to get the best deal possible.
It’s also a good idea to raise your credit score to get better loan terms and conditions. You can do so by paying bills on time and consolidating any past debt you have.
Vehicle Registration
A lot of people are selling their used cars nowadays. This is why you’ll see a lot of people trading in their old cars for new ones. If you want to do this, too, then you best bring the registration and title papers for the vehicle.
This proves that you have ownership over the car that you want to trade-in. They’ll also take a look at the condition of the vehicle. They want to verify if it’s worth the price of the new car you want, or close to it, at least.
Taking care of your old car is a great way to improve the chances of a trade-in. Any damage will reduce the car’s value, decreasing the chance of a successful trade.
Down Payment
Loans for cars will always end with a down payment. This is often the final part of the loan application process. If you want to get the best deal possible, you should pay as much as you can for your down payment.
The more you pay upfront, the less you’ll have to worry about in interest. Interest rates are often set before you make the down payment. So, the more you pay, the less total you’ll have left to pay over the loan term.
Get Your Car Loan Application Approved
Getting your loan approved and getting the best deal possible shouldn’t be a pipe dream. Know everything to include in a car loan application to get the best-case scenario for your loan. Find a lender and get started today!
Do you want to learn more about loan financing and the other options you have to choose from? Check out the rest of our guides and articles to learn all you can today!
