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What Documents Do You Need for a Car Loan?
●January 11, 2021●4 minute read
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They’re a range of documents you’ll need to submit to your bank or lender for review before getting approved for a loan. These documents help the finance companies to evaluate and determine if you’re the right fit for the loan. These documents can also vary depending on your credit and some other factors. Here’s a checklist of the what you’ll be required to submit during the application process.
Proof of identity
It is important that you provide your full personal information when applying for a loan. Your lender will need details like your full name, age, date of birth, citizenship information and list of dependents to be sure they’re not giving out money to some unknown ghost or robot. The information will also be used to track you in case of any loan malpractice. A valid driver’s license can be used for this. Your driver’s license is not exactly needed to purchase a car but you’ll need it for registration. It serves as the easiest way to prove identification. Although you can also use a passport or a state-issued photo ID.
Proof of income
Lenders need to know your income level so they’re sure you’re able to afford the loan repayments for the car you want to purchase. You can produce this by presenting bank stubs and recent paying slips. This will be used to weigh your average income before approving you for the loan. You can provide a bank statement from past months if you’re self-employed. The lender will use this to calculate your average income. Tax receipts can also be submitted as proof of income. It’s important to add any additional benefits you might be getting as proof of income. A higher and more stable income generally gives you leverage ground to negotiate better rates and deals. Your chances of getting approved are also higher with a high-income level.
Your credit report is very important to you getting a loan. It contains a history of your past credit transactions. Your credit report also shows the amount you owe compared to the credit you have. The lender evaluates and reviews this to gauge your trustworthiness. A good credit score shows that you’ve been making due and prompt bill payments and have also been consistent with past loan deals. Lenders consider people with good credit scores low-risk borrowers and are therefore more likely to approve their loan. They also have better grounds for negotiating better rates. In fact, most times people with a really good credit score don’t even have to produce so many documents before getting approved.
Lenders are however more hesitant to give loans to people with bad credit records as this puts them at a much higher risk. They’re likely to be charged really high-interest rates if they’re approved. A bad credit history, however, is not the end of the road. You can build credit by getting a secured credit card or credit-builder loan. You can also become authorized on someone else’s credit card, but do make sure the credit card owner also makes due payments as a default on their side will also negatively impact your credit score. The credit bureau is mandated to give a free copy of you a free copy of your credit report yearly on request. Request for this and look through for errors that can be corrected before submitting to your lender.
Proof of address
You need to be traceable to qualify for a loan. Lenders need to know where to find you in case you try anything funny. You’ll most times have to provide your address history for the past 3 years. Stability with housing also proves to the lender that you’re making due mortgage and rent payments and you’re more likely to be trusted with a loan. A recent utility bill from this address is enough to prove this.
Proof of assets and liabilities
Your assets can be used to evaluate your financial standings as a whole. You might need to show other sources of income and finances in stocks and bonds. This helps to improve your chance of getting approved. Most times car loans are secured with your car but in the case where you’re taking a secure personal loan to fund the car, you’ll need to provide one of your other properties or assets as security. These properties will be seized in the event that you’re unable to meet up with loan repayments. Your liabilities, current debts and loan information should also be stated. This means that you might need to provide your credit card statement and loan agreements.
Proof of savings
The amount of money you earn is an important factor in getting a loan, but lenders also need to evaluate your saving habits. You might earn a lot and be an excessive spender or gambler. You might need to provide your bank statement so lenders can judge your spending habits and be sure you’re financially responsible enough to make the loan repayments.
Car and insurance information
It is important to set up a budget before applying for a loan. This budget would help you pick a car within your means. You need to provide the details of this car to your lender to be able to properly value the car. This will help them gauge the total loan amount you’ll need. Some important information on the car includes the invoice, chassis number, Vehicle Identification Number and registration information. You should also present proof of insurance to the lender.
Third-party insurance is compulsory in Australia but some lenders also require comprehensive car insurance to be sure you can repay the loan if the car gets damaged or involved in an accident.
List of personal references
You might need to provide a list of personal references with their names, phone numbers and addresses. These contacts will verify the information you have provided on your application. This will also come in handy in case they can’t contact you.
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Written by Jacaranda Team