Are you excited about getting a car loan? If this is your first time buying a car using credit financing, this is your lucky day because you’ll learn the Common Auto Loan Eligibility Requirements. Banks, car dealerships, and credit unions need this information because it enables them to detect fraudsters attempting to buy cars using victims’ identities.
You’ll need extra requirements when applying for an auto loan after bankruptcy. The good news is that you can receive reliable advice from Complete Auto Loans’ team of highly experienced credit officers and financial advisers.
1. 9 Common Auto Loan Eligibility Requirements
Table of Contents
1. Genuine identity
In July 2018, a woman confessed to using a stolen identity to purchase a brand new Toyota 4 Runner. This modern and powerful SUV costs $35,000 and it’s steadily gaining popularity as a family car. Each year, the police deal with hundreds of cases of car purchases related to identity theft. Victims suffer greatly because when the fraudster skips payments, it’s the victim who has to endure threatening phone calls from angry loan officers.
Be prepared to produce copies of your driving license and provide your social security identification number (SSN). Some creditors take a week or two in order to do background checks using private investigators.
2. 18 years-of-age
The law prohibits minors from obtaining any secured and unsecured debts. Why? Because the government doesn’t think that teenagers fully understand the responsibility that comes with borrowing car loans. That’s why even banks have separate regulations when promoting bank accounts for teens and minors.
Potential car loan providers will request for a copy of your birth certificate, driving license, and SSN to verify your age. This verification enables them to enforce legal measures when a borrower defaults.
3. Required credit score
Creditors require potential car buyers to have a minimum credit score of 670 when applying for auto loans. Individuals with subprime credit ratings should have attained a credit rating of 550. Bad credit car loans are available to potential car buyers with credit scores below 500. Your credit score determines the interest rate on your auto loan.
If you’ve never obtained a credit report, go to FICO and download your free credit report. This will also help you gain a better understanding of the factors that determine your credit score and how to apply smart tips when applying for an auto loan.
4. Copies of your paycheck or bank statements
Creditors need to check your ability to afford and pay auto loan installments on time by assessing your income statements. If you have a full-time job, you’ll bring photocopies of your paycheck for the past six months. Self-employed car buyers will present bank statements for the past 12 months.
Why do banks and car dealerships request for annual bank statements from self-employed car buyers? Because it helps them check whether there are off-peak seasons whereby the borrower’s income decreases. This is important because the creditor will choose a more affordable repayment plan that’s ideal for off-peak seasons and enable the borrower to maintain consistent payment.
5. Proof of residence
Identity thieves tend to relocate frequently from city to city to prevent the police from locating them. An identity thief stays in an area for probably a couple of years then moves to a new city. Banks and car dealerships keep a keen eye by requesting potential car buyers to present proof of residence.
You’ll need to speak with your property manager in order to provide his or her contact information in your auto loan application form. Some auto loan providers expect copies of utility bills and mortgage payments for the past 12 months. Don’t feel offended when a credit officer asks you to bring a recommendation letter from a public figure in your local community.
6. Auto insurance reports
Subsequent car loan applicants need to present their auto insurance reports when applying for car loans. This information enables creditors to assess risk levels. A car buyer who has a high accident rate has low chances of obtaining a car loan because the vehicle still belongs to the creditor until they receive the final auto loan installment.
7. A down payment
An auto loan is a form of secured debt because a bank or credit lending institution holds onto the car title until you clear your auto loan on time. Car buyers pay a down payment as a sign of good faith towards adhering to the terms and conditions printed in the auto loan agreement. If you have an excellent or good credit score, you’ll pay a cash deposit ranging from 20-30% of the car’s value.
Car buyers in need of subprime or bad credit auto loans have to pay higher deposits. Paying a high down payment earns the car loan provider’s trust in your commitment towards paying your auto loan installments on time.
8. Copies of contract with the car dealership
While window-shopping for a car, you’ll notice that some dealerships provide credit financing without partnering with a bank or credit union. Dealership credit financing is usually more expensive and that’s why most buyers prefer banks or credit unions to borrow auto loans.
If you’ve found a car dealership that allows you to get your own credit financing, ensure you provide the bank or credit union with copies of your auto loan application form and purchase contract. Your car loan providers need this information for verification purposes.
9. No criminal record
Banks and credit lending institutions do background checks when assessing a debtor’s risk level. Unfortunately, people with criminal records have slim chances of getting decent auto loans because mainstream credit lending bodies associate crime with credit default.
2. Now you Know the Frequent car loan requirements
The good news is that these 9 Requirements of an auto loan from a bank are easily accessible for everyone. Do not allow a random car dealership or bank to download your credit report when looking for auto loans with affordable interest rates. Also, carry your own driving license and SSN card photocopies because some car dealership employees steal buyers’ identities by scanning original identification cards.