Buying a new or used car is a significant investment that typically requires financing. A car loan provides buyers with an affordable and manageable way to secure a safe and reliable vehicle without requiring a substantial upfront payment. 85% of Americans obtain financing to purchase new vehicles, and 53% take out auto loans for used cars.
When applying for auto financing, you must provide your prospective lender with several documents to verify your identity, income, credit, and residence. You must also give them information about the car you want to purchase. Use the following checklist to understand what you need to get car financing and prepare the documents for a seamless application process.
Car Finance Checklist
While specifics can vary between lenders, most finance sources request minimal information to check your credit score and assess your risk as a borrower. Whether you’re buying a new or used vehicle, prepare the following before information visiting your local credit union branch, bank, or dealership:
Proof of Identity
Under a federal law called the Customer Identification Program (CIP), lenders must verify your identity before approving you for a loan. A government-issued photo I.D., such as a passport or driving license, is sufficient for most lenders. Your ID must be current. Bring this identification with you when applying for a loan.
Proof of Income
As part of your credit risk assessment, lenders evaluate your ability to repay the loan by reviewing your income, employment status, and expenses. You’ll need to provide at least three to six months of bank statements, W-2 forms, and your current employment contract. If you’re self-employed, prepare your most recent two years of income tax returns or a 1099-INT.
If you’re applying for a large loan, you may need to prove your capacity to repay with additional sources of income. These can include revenue from rental properties or legal settlement earnings.
Social Security Number for Credit Check
Car finance approval is typically subject to a credit check. To access your credit score and history, lenders need your social security number (SSN) and personal details, like your name, date of birth, and address. Your credit score also influences the interest rates offered by your lender.
Lenders favor borrowers with low debt-to-income ratios and a history of responsible borrowing. Missed payments, unpaid bills, and a high debt-to-income ratio can raise red flags about your ability to repay a loan. Most institutions look for a debt-to-income ratio of 36% or under.
A good credit score is one of the best ways to get the lowest interest rates on a car loan. According to Equifax, a score of 670 to 799 is good or very good, while 800 or higher is excellent. Scores between 580 and 669 are fair. Credit scores of 580 or lower are considered poor, meaning you may be subject to higher interest payments.
Proof of Residence
Lenders must secure proof of residence from a borrower before approving credit per the CIP. A current driver’s license with your updated address typically meets lender criteria for proof of residence; however, other verifiable documents include:
- Household utility bill
- Bank statement
- Tax bill
- Rental contract
- Named insurance policy
Your lender will need detailed vehicle information to confirm its value and check for any outstanding loans or liens on the title. For new cars, provide a purchase agreement or bill of sale, the make and model, vehicle identification number (VIN), and proof of price.
If you’re buying a used car, you need its original title document, information on outstanding loans or liens, an odometer disclosure statement, and details on any past damage or alterations to the vehicle.
Most lenders ask you to show proof of insurance when purchasing a vehicle. Most states require minimum liability coverage for drivers, so you must have an existing insurance policy or a prospective quote when applying for a loan.
Contact your insurance company before applying for the loan, and bring any quotes or policy documentation with you when you speak to your lender.
Securing Competitive Car Finance Rates in Michigan
T&I Credit Union is a Michigan-based loan provider, offering exceptional rates to drivers across the state. We strive to provide affordable financing to all members, including those with complex financial situations.
Our comprehensive service offering includes several member benefits, including online auto finance applications, virtual banking, and financing calculators. We also provide free counseling services through our membership center, helping you improve your credit score and obtain financial management skills.
The T&I Credit Union online application process means you can have your loan pre-approved within 24 hours. Our exceptional rates allow you to secure a 60-month auto loan at 2.74% APR (subject to change).
If you live in Clawson or Troy, Michigan, and the surrounding area and are googling car financing near me, contact T&I Credit Union today at (248) 588-6688 and learn how we can help you get behind the wheel of your new ride.