What do you need to have in place to get an auto loan? There are various auto loan financing requirements you might have to meet. Those requirements are also dependent on your financial background, your selected lender, and your auto dealership.
In general, you can expect to have to meet these eight requirements to secure the financing you want for your auto loan. It’s always a good idea to contact your lender in advance of purchasing to be sure you’re prepared to meet all requirements.
Proof of Identity
Lenders have various requirements regarding how to prove your identity. Some will want to see a government-issued identification card while others will accept your driver’s license or passport. Either way, this is a federal law that must be satisfied before you can get auto loan financing.
Valid Driver’s License
Your driver’s license might be used as your proof of identity. However, if you submit a different form of identification, you will still need to provide evidence that you have a valid driver’s license. This is required for you to purchase the vehicle in your name and drive the car off the lot.
Proof of Income
Your lender will want proof that you can afford your vehicle. That’s why showing proof of income is a vital auto loan financing requirement. Your lender will want to see that you have a steady income, and you can prove this by sharing a recent check stub from your employer.
If you are self-employed, your lender might want to see your bank statements or tax forms showing your income. Providing tax returns for the past two years is typically sufficient.
Your lender might also want to know about your assets, employment history, and monthly expenses. All of this information gives a full overview of your financial state and the likelihood that you can afford to manage the monthly payments of a vehicle loan.
If you have additional income sources beyond your job, such as alimony or child support, be sure to provide documentation of those sources as well. They might factor into your total income and which can increase how much you finance.
Along with providing proof of income, you will need to share your credit history with your lender.
Your lender will pull your credit to view your credit score. This can be done as long as they have some basic information such as your name, date of birth, and social security number. They will review your credit payment history, the types of accounts you have open, how long they’ve been open, your utilization rate, etc.
By taking a look at your credit report, your lender wants to determine if you have a strong credit history and the risk associated with loaning you money. Things like late payments, unpaid bills, a high debt to income ratio, bankruptcies, foreclosures, garnishments, etc. can be a warning sign. In those cases, your lender might choose to deny your loan application or require that you accept a higher interest rate or make a higher down payment.
Proof of Residence
Another auto loan financing requirement is proof of residence. Your lender will want to know where you reside and where your vehicle will be. This protects their interest and allows them to send correspondence to you via mail.
A valid driver’s license, current utility bill, credit card statement, bank statement, or another official piece of mail with your name and address is usually sufficient to satisfy this requirement. You can not use a post office as your proof of residence, even if you get your mail there. You must provide a residential address.
Your lender also wants information about the vehicle you’re purchasing. This will include:
- Purchase price
- Vehicle identification number (VIN)
- Year, make and model of the vehicle
- Original title
- Liens if applicable
Proof of Insurance
You must provide proof of auto insurance to meet your auto loan financing requirements.
If you currently have auto insurance, your new vehicle might be covered during a grace period under your current policy. However, if you don’t have insurance, you want to be sure to purchase it before finishing your loan process so you can drive your car off the lot.
Vehicle Trade-in Information
If you’re trading in your vehicle, you need to provide information about your trade-in. Your lender wants to see your title and registration to verify that you are the owner of the car with the authority to trade it in.
Also, the lienholder information will let the lender know who holds the lien if there is currently a loan on the car. The lender might also ask for information related to vehicle history, including if it needs any repairs or has any damage.
A down payment isn’t always required to secure auto loan financing. However, in many situations, it is either a requirement or something that is recommended by the lender to obtain better financing terms. If you’re making a down payment, your lender will need you to submit your payment to secure your auto financing.
Down payment amounts can vary greatly depending on how much you choose to put down and how much the lender requires.
Meet Your Auto Loan Financing Requirements
To complete the auto loan financing process, you have to meet several requirements. The best way to get through this process faster is to prepare in advance.
If you’re thinking about purchasing a vehicle, start to gather the documentation you might need to complete the financing process. Doing so will help you save time when you’re ready to secure your financing. Also, reach out to your desired lender to get information about their auto loan financing requirements in advance.
You can learn more about our auto financing and loan options at Wasatch Peaks Credit Union.