Car Loan Approval Process Best 10 TIPS
Getting a car loan is not difficult. No matter what your credit score is, will let your lender know that you have the income and ability to repay your loan:
Legitimate employment
Most lenders want you to have a job that is considered “legitimate employment.” This means you should be allowed to work in the country, and your wages should not be paid at the bottom of the table. The employment you list on your application must have a physical location and a person who can verify the date of your rent and current income.
Verifiable “other” income
If you are listing any other source of income on your loan application other than your job (such as alimony or child support), this income should be verifiable. You should be able to show legal documents that this income is being received regularly and received over some time.
Pay the stubs
Even though your employer may be contacted by phone during the verification process, you’ll still need to give copies of your most recent salary stubs for the lender to put in your file. As long as you’re true to your application about how much money you make, you shouldn’t have a problem depositing your salary stubs when asked for them.
Tax form
You may need to show your previous year’s tax returns. If you are self-employed, you may need to show a two-year tax return. Again, this is to verify your income.
Bills
Bills that come to your house. To be approved for a car loan, the lender can ask you to submit phone bills, utility bills, cable bills, or other invoices that come to your home. This is to document and verify your address so that you are not surprised if you are asked to submit this type of information.
A current bank account
Your account information may be required by your lender for two reasons.
- First, it’s another way to verify your address. Bank statements are sent to your home so this address should match the address of your car loan application.
- Secondly, if you’re a bad credit applicant, many “buy here pay here” dealerships (dealers who finance their cars directly without going through a bank or an external lender) may require you to have a checking account that can be set up with auto-debit from your account on a set schedule. This way they can ensure that your car will be paid for on time. These debts can be scheduled to come out weekly, bi-weekly, or monthly — whichever best suits your ability to repay.
An increased down payment
Sometimes when you’re not approved for a car loan, it’s not because you have bad credit, but because the lender thinks the loan amount is too high for you to handle. If you can increase your down payment by waiting to buy a car and saving a little more cash, you can reapply for a lower loan amount once. Many times you will get approval for the increased down payment.
A co-signatory
This may be a last resort, but if you have a spouse, family member, or close friend with good credit who is comfortable co-signing for you, a co-signer can approve of you. Keep in mind that if you default on your car loan, your co-signer will be negatively affected, so be very responsible with your payment if you have a co-signer who is kind enough to help you get approved for a car loan.
Your credit report
Knowing your credit score is of utmost importance. Yes, your potential lender will pull off your credit report anyway, but you can be sure you’re getting a fair deal when you know your credit score yourself. All lenders have different credit score requirements and interest rates. Just because you’re in denial with one lender means you’ll be rejected with another. When you know your credit score, you can ask what the lender’s approval requirements are before filling out the application. This will save you a lot of time because you won’t complete applications that will reject you. You can focus your energy on applying to lenders that will get you approved.
A great car loan resource
Going to look at cars without your financing is the way most people shop for their vehicles. It’s the opposite of how you should shop for a car. What you should do is set your financing all before the tire kicks in. When you do that, you know how much it’s your budget, and how much your car will pay off, and you have better conversations to take advantage of at the dealership. When you already have your loan, you’re a potential customer with “money in hand.” No car dealer wants to see potential sales exiting the door, so you’ll have the power to negotiate the best price on the car you want.