What Documents Do You Need To Get A Car Loan?
For many of those purchasing a car, getting car financing in Brampton is an integral step to getting you closer to purchasing and owning the car of your dreams.
When applying for a car loan, applicants hope to get approved as quickly as possible. The first step to expediting the process is starting with the basics and providing all the necessary documentation lenders are looking for to process your application.
Why is this important?
You will be surprised how often applicants unintentionally slow down their own processing times by not having the right documentation they need when submitting their application. Missing key documents also increases your chances of getting your car financing rejected, forcing you to reapply all over again. To minimize that downtime as much as possible, make sure you have everything from the start to ensure a smooth and easy application process.
Why do lenders ask for so much documentation in the first place?
The bulk of the reason has to do with the fact that lenders want to see that you are good credit risk. They want to make sure that if they do end up approving you for the loan, you’ll be trusted to pay back the money in a timely manner.
Now before we dive into what what you need to apply for a car loan, we should explain what a car loan actually is first. The more you understand the process and why it’s done, the greater the chances of you getting approved. Knowledge is power, right? Let’s get started!
What Is A Car Loan?
When you decide to purchase a car, people typically go one of two ways — they either pay it in full or they finance it through a car loan.
If you decide finance your car in Brampton, a lender will loan the borrower (that’s you!) the money you need to buy the car. In order to initiate this exchange, the borrower agrees to pay back the lender an agreed amount of money plus interest. This owed amount is usually paid off on a monthly basis. The relationship between the lender and borrower continues until the amount is fully paid off, by which time the borrower can officially say that they own the vehicle.
But what happens when the borrower fails to make their payments? Unlike other loans available in the market, car loans are secured. What does that mean?
If a borrower fails to make their agreed monthly payments, the vehicle you purchased can be repossessed and sold off to pay the rest of your outstanding debt to the lender..
How can you prevent this from happening?
Make sure you strike a car loan deal that works for you and your budget. The best way to do this is to shop around and look into different lenders to see what each other their offerings are. Here are some key considerations to make include when looking into different car financing options in Brampton:
- Initial Down Payment – as part of most lender agreements, the borrower has to put down an initial down payment. This payment is usually a small percentage of the total price the borrower is expected to pay. This is usually paid upfront in order to begin the lender-borrower agreement. While this practice is not standard everywhere, it’s very likely most lenders will ask for some money to start.
- Interest is the additional percentage rate charged on top of what you owe a lender. This can vary from lender to lender agreement so make sure you take the time to compare different interest rates and find one that works for your budget. Always remember, the lower the interest rate, the less you’ll pay for the car in the long run.
- terms and conditions include information like timeframe of the agreement, loan payoff, and car maintenance conditions. It also includes other stipulations that cover car theft, accidents, and additional terms for when payments can’t be made. When the terms and conditions are presented to you, be sure to go over it carefully. Make sure it covers all the bases you initially agreed upon so there are no unexpected surprises down the road.
Now that you know exactly what a car loan is and understand why lenders ask for the information they do, you’re ready for the next crucial step. Read on to find out what documents you need when car financing in Brampton!
What Documents Do You Need To Get A Car Loan?
If you’re applying for a used car loan, there’s a lot of information that your lender will request from you. Luckily used car dealerships are required to pass along a detailed buyer’s guide with all the essential information about your vehicle which you can pass along to lenders. Some of the key information your lender will want to know is your car’s price tag, model, make, mileage, and identification number.
Proof Of Income
When applying for a car financing in Brampton, most lenders will require some proof of income. Lenders want to make sure that the borrower is actively earning enough money so they can be trusted to fulfill their car payments on time. The best document to bring would your most recent work pay stubs, ideally no older than one month old.
But what about if you’re self employed or freelance?
Unfortunately lenders will require a bit more documentation if you fall under any of these categories as lenders want to confirm you have a steady income and still capable of making monthly car repayments. Applicants that fall under this category will usually be asked to bring anywhere between 2-5 years of tax history, depending on the requirements from the lender. They’ll also be asked for bank statements from the last couple months to confirm everything in their account in the green.
Proof Of Residence
A part of a lender’s job is actually verifying your home address. Be sure to bring a recent bill that was mailed to your home to help confirm this for them.
Providing proof of identification is a common part of any application. When applying for a car loan, you will need photo ID with your signature on it. Valid IDs in this category include your driver’s license, passport or any other government issued cards. Prior to applying, be sure that none of your IDs have expired or else your application won’t be able to be processed. In addition to valid photo ID, applicants are also asked to bring in a current bill with their name and current address on it.
Proof Of Insurance
In Brampton and across Canada, the law requires that all cars be insured or else they aren’t allowed to be on the road. Before applying for a car loan, be sure you have adequate coverage and be sure to add that documentation along with your application. If you don’t have coverage yet, it’s something you’ll definitely have to get before applying for a car loan.
While you’re able to secure coverage from your dealership, which may seem like a convenient option, it’s always a good idea to shop around first snag an insurance deal that’s best for you.
If you’re trading in your car, you’ll want to submit all the trade in information to help determine the actual worth of your trade-in vehicle. This is very important because the car’s worth will actually help determine how much financing you able to receive through your lender. To help expedite the process, be sure to bring this document with you.
This is probably one of the most important parts of your application and definitely something all lenders want to see when assessing your eligibility for a loan. Why? Because they want to see if you’ve been able to pay back other debts you’ve acquired and whether you are in good standing to take on more debt.
For this one, you don’t actually need to bring in any physical documents as lenders can access this information on your behalf. With that said, knowing your credit history is something everyone should take a look at prior to applying. Understanding where you stand will actually give you a good idea whether or not your car loan will be approved.
If you’re worried your credit will hold you back from getting approved, this is where BramptonBadCreditCarLoans.ca can help you. If you have bad credit or no credit, they’ll take your application and shop it around to their trusted network of financial partners to strike a deal that works for you. Contact them today to see how they can make the best out of your situation.
Pro tip: Think you’re ready, set and good to go on and apply for that car loan? Hold up! An important thing to remember is all lenders work differently. Some will require certain documents that others don’t, so to make sure you have everything, call your lender beforehand to make sure you aren’t missing anything.
Tips To Make Sure Your Car Loan Gets Approved
Now that you’re set and all ready to go, the next step is getting approved! What do you need to do to increase your chances of approval? Read on to find out!
As we mentioned previously, having all your documents with you when applying for a car loan is an essential first step. Make sure to go through all the documentation to see that nothing has expired and that all the information you’ve presented is recent and accurate. Double check to make sure there aren’t any errors in anything that you present so it doesn’t wreck your chances of getting approved.
Pay Off Your Current Debts
You never want to take on too much debt, in fact too much under your name will look undesirable to some lenders who may question your ability to pay them back on time. To become a more appealing candidate for car financing, pay off whatever debts you can first.
Check your credit report
Your credit score is one of the key indicators of whether or not you’ll be able to qualify for a car loan. If you have bad credit right now, instead of applying right away you may want to take the time to repair it first so you can become a good candidate for car financing.
Alternatively, knowing where your credit stands can also redirect you to the proper lender. While banks and credit unions often look for a spotless credit history, alternative lenders like BramptonBadCreditCarLoans.ca provide more flexibility. No matter what your financial situation is, they can help finance your car you want with the budget you have. No matter what your situation is, they’ll make your dreams of becoming a car owner come true.