Finding your dream car is easy. The challenge comes with obtaining financing for your desired vehicle. If you are unable to purchase the car in cash, opt for a low-interest car loan. Lenders use your personal financial data to determine whether you can afford the loan. If you prepare your financial information in advance of finding your car, you can save time when closing on the loan.
Identification
When applying for a car loan, identification is required. Bring a government-issued photo ID and a second form of identification, such as a Social Security card, to the dealership when you buy a car. The dealer may require that your first form of ID is driver's license. Physical copies of each ID are needed for the lender's records. The salesman will make copies of each item and return them to you as you complete your loan application.
Applications request personal data, such as your current address and any previous addresses if you've been at your current address less than two years. You must include your employer's name, phone number and a list of references on your application.
Income
Bring copies of your recent pay stubs to the dealership to verify your income. If you are self-employed, a copy of your most recent tax return, and bank statements can replace pay stubs. Generally, income verification of up to four pay periods is needed to process your loan. The longer your employment history, the better your chances of approval for the loan. Borrowers who change jobs frequently or who have a short employment history are viewed as a high risk.
Credit
Lenders check your credit score to determine your level of risk as a borrower. Information in your credit report, such as whether you make timely payments or carry high balances on credit cards, allows the lender to make a sound judgment on whether to extend new credit to you. If you have a history or abandoning debt, a lender is less likely to approve you for a car loan.
However, each item in your credit report is not judged separately. Your risk as a borrower is reflected in your credit score. The higher your credit score, the less of a credit risk you are to lenders. Consumers with low credit scores are higher risk, which means higher interest rates when applying for a loan.
Insurance
Bring a copy of your full-coverage insurance policy to the dealership when searching for your new car. Insurance isn't required for all car loans. State laws mandate whether you can buy a car without an insurance policy. However, insurance is a vital resource as it can protect you in the event of an accident. The amount you pay in car insurance varies based on the type of car you own.
As soon as you have a make and model for your new car, call your insurance provider to add the car to your existing policy. If you need a new policy, you may be allowed a grace period of up to 48 hours to provide your lender with a copy of your insurance policy.
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