The Auto Loan Approval Process Explained

When applying for auto loan approval, you will be ahead of the game and save yourself time if you are familiar with what lenders look for when they qualify car loan applicants. Before approaching lenders for auto loan approval, do your homework with these financial institutions in advance.

Work With a Lender Directly

Many people prefer the convenience of letting the car dealer arrange the financing for their auto loan. Although this might seem simpler, your auto dealer isn't going to be looking out for the best terms for you. They'll seek the deal that best benefits them. This is an important example of saving money by doing it yourself.


Before you apply for to a lender on line, on the telephone, or in person, collect all of your financial documentation. Documents most lenders will need to see prior to any auto loan approval include copies of your pay stubs that record your year-to-date earnings. If you don't have pay stubs, then you'll need other proof of income (such as cancelled checks), along with approximately 4 months of bank statements. If you are in business for yourself, you will need to bring along copies of the past 2 year's tax returns. Lenders will also want to see that you have a checking account, and what's in it.

If you have additional income - for instance, if you receive spousal support, rental income, or have received an inheritance - it could benefit you to include proof with your other supporting documents. Records of additional income isn't a requirement, but it could help you obtain better terms, a higher loan, or save you time by helping to expedite the auto loan approval process.

Understand Your Credit History

Get a copy of your credit history from one of the three companies mandated by law to provide credit histories free of charge once a year to consumers (Equifax, Experian and TransUnion). Familiarize yourself with the contents of your credit report in advance, and be prepared to discuss any errors or delinquencies with your prospective lender. Dispute any errors on the credit report before seeking auto loan approval from a lender.

Proof of Residence

The easiest way to document proof of residence is with a copy of a phone bill for a land line. If you don't have a land line, then your cell phone bill should be addressed to your place of residence. The finance company needs to verify that you live where you say you live, and any proof of residence must report the same residential address you put on your loan application. If you don't have phone bills that can document your residence, other business correspondence addressed to you at home can be an acceptable substitute.

Finally, if your credit score isn't good enough to get auto loan approval on terms you can afford, or if your income doesn't qualify you for the loan amount you need, you might consider finding a co-signer. A qualified co-signer will make you a better loan risk and qualify you for auto loan approval where you were unable to meet the requirements on your own.

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