When you apply for a car loan, affordability plays a big part in whether you qualify or not. Part of that comes down to how much you earn and any other income you may have. But how do car dealerships verify your income?
You put down your income on the loan application but the lender won’t just take your word. It will want proof.
How you go about proving your income depends on what the lender asks for and what type of income you have. Here are a few scenarios we have seen in Simcoe auto loan applications.
How Dealerships Verify Income for Employed Applicants
If you’re a standard employee, the lender will usually request payslips from the past three months. If you have been with your employer for over a year, this is usually enough.
If you have been employed less than a year, some lenders will request an offer letter stating you have a permanent position or may request permission to contact your employer directly.
How Dealerships Verify Income for Self Employed Applicants
If you’re a contractor or self employed, you have a little more work to do to verify your income. You will usually be asked to provide your most recent tax return and bank statements.
If you use an accountant, some lenders will request a letter from the accountant stating your income. Otherwise, a tax return and three month’s bank statements should suffice.
How Dealerships Verify Income from Other Sources
If you’re retired, living off investments or rental income, you will have a similar problem to the self employed. A higher burden of proof to demonstrate you have sufficient income to be able to afford car loan repayments.
This can be in the form of bank statements, pension statements, rental income and any formal documentation for every source of income you have.
Prepare Your Paperwork to Quickly Verify Income
Lenders will typically like to see the above paperwork in any car loan application but you can pre-empt this so your application can go through faster by…
Compile all your income paperwork and produce copies of everything.
Check your credit report to make sure everything is correct and it accurately reflects your situation.
Check your credit score to ensure you have sufficient score to qualify for the loan.
Save for a down payment to offset any perceived risk from a non-standard employment status.
Get pre-approved before you apply for the auto loan so you don’t ask too much.
Even though not all lenders will want to see 3 month’s bank statements, prepare them anyway. Prepare as much as necessary in advance so it’s ready to go if they ask. If the lender doesn’t ask, you don’t lose anything except a couple of minutes of your time.
It’s always best to over-prepare than under-prepare and car loan applications are no exception. It’s better to have something and not need it than need it and not have it. Especially if you’re in a hurry and need a car loan fast!
For those of you who know that you have a challenging credit situation, please visit Dixie Auto Loans where we have a team of credit specialists ready to help you get approved for a car loan today!