Car loans are not hard to get. No matter what your credit score is, in order to get approved for a car loan there are ten basic things you should have in place when you apply. Having these things will show your lender that you have the income and ability repay your loan:
#1 – Legitimate employment. Most lenders will 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 under the table. The employment you list on your application must have a physical location and a person that can verify your date of hire and current income.
#2 – 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 must be verifiable. You must be able to show legal documentation that this income is being received on a regular basis and has been received over a period of time.
#3 – Pay stubs. Even though your employer may be contacted by phone during the verification process, you will still need to give copies of your most recent pay stubs for the lender to put in your file. As long as you are truthful on your application about how much money you make, you should have no problems with submitting your pay stubs when you are asked for them.
#4 – Tax forms. You may need to show your last year’s tax returns. If you are self employed, you may need to show two years’ worth of tax returns. Again, this is to verify your income.
#5 – Bills that come to your house. In order to get approved for a car loan, the lender may ask you to submit phone bills, utility bills, cable bills, or other invoices that come to your home. This is in order to document and verify your address so you should not be surprised if you are asked to submit this type of information.
#6 – A current bank account. Your bank account information may be required by your lender for two reasons. First, this is another way to verify your address. Bank statements are sent to your house so this address should match the address on your car loan application. Secondly, if you are a bad credit applicant, many “buy here pay here” dealerships (dealers that finance their cars directly without going through a bank or outside lender) may require you to have a checking account that can be set up with auto debit out of your account on a set schedule. This way they can ensure that your car payment will be made on time. These debits may be scheduled to come out weekly, bi-weekly, or monthly – whatever suits your ability to repay the best.
#7 – An increased down payment. Sometimes when you are not approved for a car loan, it is not because you have bad credit, but because the lender thinks the loan amount is to high for you to handle. If you are able to increase your down payment by waiting to buy a car and saving up a little more cash, you can reapply for a lesser loan amount once you do. Many times an increased down payment will get you approved.
#8 – A co-signer. This may be a last resort, but if you have a spouse, family member, or close friend with good credit that is comfortable co-signing for you, a co-signer could get you approved. Keep in mind that if you default on your car loan, your co-signer will be negatively affected so be very responsible with your payments if you have a co-signer that is kind enough to help you get approved for car loan.
#9 – Your credit report. Knowing your credit score is of the utmost importance. Yes your potential lender will pull your credit report anyway, but you can be sure that you are getting a fair deal when you know your credit score yourself. All lenders have different credit score requirements and interest rates. Just because you are denied with one lender does mean you will be denied with another. When you know your credit score, you can ask what the lender’s approval requirements are before you fill out the application. This will save you a lot of time because you will not be completing applications that will deny you. You can focus your energy on applying with lenders that will get you approved.
#10 – A great car loan resource. Going to look at cars without having your financing in place is the way most people do their vehicle shopping. This is the opposite of how you should be shopping for a car. What you should do is have your financing all set up before you go kicking tires. When you do this, you know how much your budget it, how much your car payments will be, and you have much better negotiating leverage at the dealership. When you have your loan already in place, you are a potential customer with “money in hand”. No car dealer wants to see a potential sale walk out the door, so you will have the power to negotiate the best price on the car you want.
Ken S., Founder