Requirements for Bank Auto Loan Approval

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, - May 26, 2016

When searching for auto financing, consumers often overlook bank auto loans, generally opting for a dealership loan. Obtaining a loan from a bank is equally as fast and efficient in financing your vehicle. The main benefit in having a bank finance your auto loan is the money you will save because banks generally offer low rate auto loans with the best annual percentage rate. When securing bank loans, consumers must provide personal information including their income, employment, credit history and insurance.

Application

The first requirement is obviously to complete the bank’s loan application. The application requests personal information such as your name, social security number, address, phone number and identification. In addition, you must tell the bank if your purchase is a dealer purchase, refinance or a private party purchase.

Credit Score

Most banks require a credit check to determine your credit score. Your credit score determines the loan’s terms, such as the amount of the loan and APR. Consumers with excellent credit qualify for low rate auto loans. Conversely, those with less than perfect credit have to pay higher interest rates on their bank auto loans.

If your credit is less than stellar, seek out a co-signer. A co-signer will help out your cause and will increase your chances of getting a loan. The reason why a co-signer helps when trying to get private auto loans is because they are partially responsible for the loan and the lender will also look at their income as a determining factor when approving your loan application.

Proof of Residence and Identification

In an effort to prevent fraud and identity theft, lenders want to make sure you are the person you claim to be. As proof of identification, you will need your driver’s license and in some cases, your social security card.

Income and Employment Verification

To verify your income and employment, a bank may ask for copies of your pay stubs. In some cases they may actually contact your employer. If you are self-employed, they may request tax information and/or bank statements.

Proof of Insurance

Before closing your loan, you will need to show proof of your insurance such an insurance card or your policy number. The lender will call to verify this information. Although you will be allowed to secure insurance before you leave the bank, it is best to have this information prepared in advance.

Down Payment

If you have a few credit blemishes, the lender may ask you to provide a down payment to show that you are willing to invest in your vehicle. A down payment is the amount of money you contribute upfront. Down payments range from 10 to 20 percent of the purchase price of the vehicle.

A down payment is a very important determining factor when getting accepted for a loan with no credit, because a higher down payment means that there is less risk on the lender. Also, a large down payment can prove to the lender that you are a responsible individual who knows how to save and will provide evidence that you are improving your credit score.

Seek a Co-Signer

The last factor when trying to get bank auto loans with bad credit is to seek out a co-signer. A co-signer will help out your cause and will increase your chances of getting a loan. The reason why a co-signer helps when trying to get private auto loans is because they are partially responsible for the loan and the lender will also look at their income as a determining factor when approving your loan application.

Securing a bank auto loan does not have to be difficult. If you are prepared and know what to expect in advance, meeting the requirements is quick and easy. In fact, having a bank loan may actually save you a few hundred, possibly even thousands of dollars over the life of your loan.

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The CarsDirect editorial team is dedicated to providing our readers with the latest on new and used cars, expert opinions on which vehicles make the grade, and all the fun stuff in between.


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