There are a few milestones in life that really matter, and getting your first car is one of them. Buying a car is a huge and exciting step for anyone. A car is an investment and a long-term one at that. However, paying in cash for a car is a luxury that not everyone can afford. So, if you don’t have enough cash, this leaves you with one option: applying for a car loan. To ensure you get approved for an auto loan, you need to be prepared to provide the right documents and check your credit score beforehand.
If you want to understand what you need to prepare for a car loan then keep reading.
Check Your Credit Score
The first thing that the lender will look at in order to determine the type of loan they will give you is your credit score. It doesn’t matter where you are getting your loan from; whether it is a bank or an auto dealership, the interest rate will depend mainly on your credit score. However, you should know that each lender has its own criteria for what qualifies as a minimum score. This is why you need to ask your lender about the credit score they require so you can request the necessary reports.
If you want to get a car loan then you need to make sure that you have identification on you. You must provide a photo ID and sign it, a current utility bill that must be in your name and includes the same address as the one in your ID, and the last two months of your current bank statements. If you don’t have an ID available, you can provide your passport, the title to your house, or stock certificates instead.
Proof of Income
Typically, lenders would need some degree of assurance that you will be able to make your car payments on time. This is why you will need to provide proof of income. The best way to prove your earnings is by generating pay stubs that provide your current annual income, ensuring that the ones you present are recent. On the other hand, people who are self-employed must provide bank statements and tax returns. Each lender may have their own requirements when it comes to tax returns. Some may ask for two years of tax history while others may require five. The bank statements that you will have to provide must be from the last three months.
You have to provide proof of address so the lender can confirm where you live. There are different ways that you can verify your address, like providing a utility bill, or any business letter that you have recently received at your current address.
According to the law, all cars must be insured. Before the lender can decide on giving you a loan, they have to first verify that you have appropriate coverage. However, if you are already insured, make sure to bring proof of insurance. If you aren’t covered then you can contact an insurance company from the dealership in order to secure it. However, it is recommended to check other lenders for better policy rates.
If the loan you are applying for is a used car loan, you should provide the lender with the necessary car information. They will require the car’s price, identification number, model, mileage, year, and make. Basically, you will have to provide every available detail about the vehicle. According to the used car rule, the car dealer must provide you with a detailed guide for the car you want to buy. You will find in this guide all the information required to apply for an auto loan. Before you sign, you should read this guide carefully and make sure that you understand everything in it.
Prepare a Down Payment
In order to access a car loan, you will have to secure a down payment for your new car. You will need to put 20% down payment. If you don’t have enough money for the down payment and you plan to borrow the money, ensure that you are able to pay it back to avoid getting into trouble.
Everyone wants to own a car but a lack of finances may stand in the way. However, options like car loans can help many people achieve this dream. In order to avoid any problems while applying, make sure that you provide all the information and documents mentioned here. These documents and information will put the lender’s mind at ease and will make you seem trustworthy.