Although applying for an auto loan is fairly simple, you need to understand the requirements before dedicating time to the process. If you have never applied for a car loan before, there are several items you will need to bring with you when applying for the loan. To make the auto buying process as easy as possible, you may want to get pre-approved for a loan before you begin shopping.
Probably the most important document you will need before qualifying for an auto loan is proof of income. This will entail saving at least a month’s worth of pay stubs from an employer or proof of income from self-employment. The lender may also verify your income with your employer.
Another document you will need to bring with you when applying for a car loan is proof of insurance. If you do not currently own a car, you will need to contact an insurance company and be prepared to purchase an insurance policy on your car before you leave the dealership.
You will also need proof of identity and proof of residence. Most auto dealers will require you to show a valid driver’s license as proof of identity and a utility bill or other document that shows your name and where you live. This is to make sure the dealership or lender can contact you in case there is a problem with your loan.
If you do not have any credit or your credit score is very low you may need to find a co-signer when applying for an auto loan. Ask a family member or a close friend if they would be willing to help you establish or build your credit by co-signing.
The lender will also look at your debt-to-income ratio. This is important to make sure you can afford to make car payments. The lender will consider your rent, utilities, cell phone, child support and other monthly bills.
When you purchase an automobile you will probably need a down payment. This could be your trade-in or money you have saved for this purpose. When qualifying for a loan the lender will take into consideration how much money you can put down on the car and how much the car costs.
Buying an automobile can be stressful. But if you consider the documents you need and the process for qualifying for an auto loan, you can drive away in the car of your dreams.
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