Car Loan Documentation Checklist: The 8 Things You Need
Bringing the appropriate documents could help you to get a car loan more quickly when it’s time to apply. Generally, lenders are looking for proof that you are a good credit risk and will be able to repay the loan. This information, along with your credit report and score, will factor into the interest rate you are offered. To get you started, here’s a checklist of what you need for a car loan.
- Proof of identity
- Proof of income
- Credit and banking history
- Proof of residence
- Vehicle information
- Current vehicle registration (for trade-in)
- Proof of insurance
- Method of down payment
What do I need for a car loan?
It varies, but sufficient income, credit and a history of paying debts on time are among the top things lenders are seeking. Some list their requirements on their websites where you also may also apply and upload certain documents, such as a driver’s license or pay stubs. It will help to have those items with you if you plan to apply through the dealership.
1. Proof of identity
Lenders are required by federal law to confirm customers’ identification. For most, a driver’s license, passport, U.S. visa or other government-issued I.D. showing your photograph and name should be enough. In some circumstances, lenders are able to verify your identity without documentation. In these instances, the lender may contact third-party sources, such as a consumer reporting agency.
Business auto loans
If you are taking out an auto loan as a business, you’ll need to use your Employer Identification Number (EIN). In addition, lenders may require documentation like articles of incorporation or partnership agreement and business license to prove the identity of your business. Dealers may require a business card and letter of authorization to purchase the vehicle on company letterhead. While these will provide proof of identity, keep in mind you may have to meet other requirements, like having a positive cash flow and two years of financial statements.
2. Proof of income
Lenders want to determine that you have the ability to repay your auto loan before they finance a car. This goes beyond just running numbers based on an interest rate. Lenders should assess your income, assets, employment, credit history and monthly expenses to determine that you’re able to pay back the loan.
When you’re applying for your loan, you’ll want to take copies of your pay stubs from the last month, showing the total of what you’ve been paid year to date. You may also be able to use bank statements to show proof of income — be prepared with up to six months of statements — or a W-2. In some cases, the lender may call your employer to verify employment and income.
If you are self-employed, lenders often use tax returns to determine gross income, so bring copies of your tax returns from the past two years. A 1099 may also be sufficient to prove income. Be sure to find out whether your lender requires any paperwork to be signed by an auditor.
Showing proof of additional sources of income or other assets may help you to qualify for a larger loan or improve the terms of your loan. If you have income from rentals, legal settlements, alimony, child support, Social Security or other sources, take proof with you.
3. Credit and banking history
When you apply for a car loan, you’ll need to provide lenders your Social Security number, as well as your name, address and date of birth so they can pull your credit. Auto lenders may utilize different credit scoring systems, including FICO auto scores.
They also may review your credit history, including the type of credit accounts you have, when you opened them, the credit limit or loan amount, your account balance and payment history.
Lenders are looking at your history to determine if you have late payments or unpaid bills, as well as your total debt obligations to determine if you have a low enough debt-to-income ratio (DTI) to support an auto loan.
In addition, lenders may also look at public records and collections in your credit history, including bankruptcies, foreclosures, lawsuits, wage garnishment and liens. A past history of unpaid bills and collections, especially related to an auto loan, will adversely affect a lender’s confidence in your ability to repay the loan.
4. Proof of residence
Federal law requires lenders to gather information on your residence, as well as proof of that residence. If your driver’s license is current or the address you provided on the credit application matches the address on your credit report, this may be sufficient for most lenders. If you recently moved however, you may need to provide further documentation. You may be able to use a piece of personalized mail you have received within the last month such as:
- Utility bill
- Mortgage statement
- Lease agreement
- Credit card or bank statement
- Property tax bill
- Medicaid or Medicare benefit statement
- Homeowners or renters insurance policy
Since a physical address is required, you may not use a post office box. The only exception is for Army Post Office boxes (APO) or Fleet Post Office (FPO). You may also use the address of a next of kin.
5. Vehicle information
If you’re financing through a dealership, the dealer will provide all the vehicle information to the lender. If you are working with a lender directly or buying a car from a private seller, you will need to obtain or complete a bill of sale, purchase agreement or buyer’s order, which should include:
- Purchase price
- Vehicle identification number (VIN)
- Year, make and model
If you’re buying a used car, get the above information from the seller, along with the car’s mileage, original title and disclosure of any liens on the car.
6. Current vehicle registration (for trade-in)
When trading in a vehicle, you’ll want to bring your title and registration to speed the transaction along. A certificate of title proves you are the owner of the vehicle, and lists any lien holders. You may also need to provide an odometer statement and, depending on the state, smog certificate and disclosure of any damage that has occurred to the vehicle under your ownership. A dealership will usually provide these last forms to fill out if you don’t have them.
7. Proof of insurance
Once you’ve signed a bill of sale on a vehicle, you’ll be asked to provide proof of insurance. The insurance you have must comply with your state’s laws and meet any additional requirements of the lender before you’ll be able to drive the vehicle off the lot.
If you have an existing auto insurance policy, your new car purchase may even be covered by your existing policy for a certain grace period, so be sure to check.
If you currently don’t have auto insurance, it’s a good idea to shop around prior to purchasing a vehicle. Get multiple quotes so you know what to expect. When you’re financing a vehicle, keep in mind most dealers won’t let you drive the car off the lot until you have proof of insurance. This may be difficult if you purchase the vehicle on an evening or the weekend, so be sure to plan ahead — all you need is the VIN to get the process started.
8. Method of down payment
When it comes to making a down payment on a car, be prepared with your method of payment. This may include:
- Personal check
- Cashier’s check
- Credit card
- Debit card
- Preapproved loan
- Personal loan
If you want to use a credit or debit card, ask the dealer to be sure they will accept this form of down payment and if there’s a cap on how much can be charged. Also, check with your card issuer to see if there is a limit to the amount you may charge in a single transaction. The last thing you want is to have your card only be able to charge $2,000 when the total down payment is $5,000.
For personal loans, keep in mind that getting such a loan prior to getting approved for an auto loan will likely impact how much you can borrow, as the credit inquiry and loan will show up on your credit report and affect your DTI ratio.
How to get a car loan
To get a car loan, you should know your credit score and have a budget in mind. It can be easy to overspend if you have only a vague idea of how much you want to pay. And the worst time to find out that there is an error on your credit report is when you’re applying for a car loan. It’s a good idea to request copies of your credit report and check your credit score.
When you apply, lenders will ask how much you want to borrow for how long in order to provide a loan offer to you, so it’s smart to use a car affordability calculator to see what’s in your budget. An auto loan preapproval will let you know if you’ll be approved for that amount and at what interest rate. Go directly to a couple of auto lenders or fill out a single online form at LendingTree and receive up to five loan offers from lenders, depending on your creditworthiness.