What Paperwork Do I Need for Car Finance?

You picked out the car and you know your budget. The next step is to find financing for your new vehicle purchase. When you go into a financial institution for a car loan, you need to come prepared. Failing to bring the right paperwork can result in repeat trips to your lender and delayed approval on your loan.

To ensure your loan application process goes smoothly, get organized and bring the appropriate documents to your car financing appointment. Learn what types of paperwork you need to present for car financing so that you get approved and on the road as soon as possible.

What Paperwork Do I Need for Car Fiance?

Like most other loan application processes, car financing requires you to present a number of official documents to your lender for approval. This can be done online in some situations, but many require in-person visits with physical documents. Either way, it is helpful that you find and organize these papers before jumping into the application process. So when you are ready to visit your lender for a car loan, bring the following documents. 

Proof of Identity

Proof of identity proves you are who you say you are. It is usually a government-issued photo ID, such as a driver’s license or identification card, or passport. This document cannot be expired or damaged to the point of being illegible. Some institutions may accept other forms of identification, such as citizen cards; however, you need to check with your lender to be sure.

Proof of Income

Proof of income shows the lender that you are employed and that you have funds coming in with which to make the monthly payments. Proof of income includes bank statements, pay stubs, and the previous year’s tax return. Print out about 3 to 6 months’ worth of pay stubs or bank statements to show that you have a stable income.

If you just started a new job, bring in an official letter from your employer that states your position and salary or hourly pay rate. While this document may not be enough proof on its own, if you also bring bank statements or pay stubs from previous jobs that show you have a long history of reputable employment, the lender is more likely to loan you money.

One final option is to consider is to ask a financially responsible individual, such as a parent, to co-sign on the auto loan with you. A co-signer takes on responsibility for the loan if you default, so it is a large commitment on the part of the co-signer. For younger borrowers, such as college students, a co-signer helps you get your car purchase financed.

Proof of Residence

Proof of residence lets your lender know where you live so they can send you important documents related to your loan. Proof of residency is shown with an account statement from the last 90 days, a credit card or utility bill from the previous 90 days, a mortgage or rental agreement that includes landlord’s contact information, pay stubs that include employer’s contact information, insurance policies, or federal or state correspondences.

Proof of Insurance

Before your car financing is finalized, you must provide proof of auto insurance to the lender. In many states, it is illegal to drive without insurance. Therefore lenders must see proof of insurance before releasing loan funds. If you are a first-time car buyer, speak with an insurance company before going into the dealership.

You need to give them the vehicle identification number (VIN), so it is helpful to have an insurance agent who is ready to instate your policy right away. If you have an existing policy, check to see if a new car purchase is covered for a certain amount of time. Either way, have the policy number and contact information ready for your lender.

Vehicle Information

To obtain car financing, bring the vehicle information with you to the financial institution. If you use a dealership to finance, they will already have the information for the lender, but if you obtain a private loan through a bank or credit union, you provide the information to them. Bring information such as the make, model, miles, VIN, and value of the car you are buying.

You should have a bill of sale that has this information included. Also include the purchase price, original title, and information about liens on the car if you are buying a pre-owned car.

Trade-in Documentation

If you are trading in a vehicle, bring the title and registration to the car financing appointment. The title should show that you are the owner of the car and list any lien holders. Make sure the title shows the mileage on the car, smog certificate and that you disclose any damage or repairs that have been done to the vehicle.

Trading in your car has many advantages when you go to get new financing. Your trade-in lowers the amount of money you have to borrow. This equals less money spent outright on interest and monthly payments. Take the time to gather the appropriate trade-in information because it can save you thousands of dollars during your financing transaction.

Method of Down Payment

Bring your method of down payment to your car financing. A down payment is the amount of money you put toward the total cost of the car upfront. A down payment is a good idea because it reduces the amount you finance for the car and keeps you from ending up in an upside-down loan where the vehicle is worth less than you pay for it.

A good number to aim for is a 20% down payment, although slightly less is still beneficial. Bring cash or a personal check as a downpayment. If you want to use your credit or debit card, make sure the lender accepts these forms of payment and make the card transaction limit that allows for the amount you need. Other forms of down payment include cashier’s checks, personal loans, or pre-approved loans.

Credit History Report

As part of the final car financing process, your lender pulls your credit report. It is helpful to check your credit report before applying for a car loan. It allows you to get an idea of what type of APR to expect on your loan. You are entitled to one free credit report per year, so take advantage and print out this report to give to your loan officer.

Your credit score and credit history affect the interest rate lenders offer you on a loan. Some banks will not lend to you if your credit score is below average, while dealerships often prey on those with low credit scores. T&I Credit Union works with people who have good to excellent credit to get them fair rates on car financing.

Pre-Approval Process

One way to speed up your car financing is to get pre-approved for a loan. For this process, you need to enter your information online. This is a great time to find all the paperwork you need for final approval so that you already have it handy and organized.

Pre-approval takes about 20 minutes with T&I Credit Union and lets you know an estimated APR based on your credit score. If you are pre-approved, you will already have the documents you need for your final approval for the auto loan.

Dealership Financing or Traditional Lenders?

Often people think that getting financing through a dealership is more convenient. It is easy to shop for your car, take it for a test drive, and sign the papers with the dealership right then and there. It also seems like there is less paperwork that you need to gather to get financing through a dealership.

The critical thing to keep in mind is that dealerships make money through this convenience, and it often ends up costing you much more than if you had gone with a traditional lender such as a bank or credit union. Dealerships work with financial institutions to offer you financing; however, they have no legal obligation to give the same rate that the lender offered. This leads to higher interest rates for your loan.

When you work with a bank or credit union, you skip the middleman. You may have to bring in additional paperwork, but you end up saving thousands of dollars in interest over the course of the car loan. Lenders require specific documents because they take their time to verify their borrowers and loan them only what they can afford, instead of trapping them into high-interest loans for outrageous profit.

Car Finance Loan

Get Car Financing With T&I Credit Union

Gather your paperwork and apply for car financing through T&I Credit Union. Call (248) 397-9456 to speak with a Loan Officer to discuss our rates and start the auto loan application process today.

About Lynn Mayfield

Lynn Mayfield studied business at the University of Kansas and enjoys analyzing new economic trends and how they affect the banking industry’s future. Lynn has worked in loan processing and freelance writing. She enjoys traveling in her free time.

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