If you are thinking of purchasing a new car, chances are you have pondered the idea of financing your next car.
When applying for an auto loan, any bank, credit union, or private lender will need to see proof of income.
However, it is highly suggested that you are certain that you can qualify before you begin to inquire about auto loans.
How Lenders Verify Income
Every lender you come across will ask for proof of income.
Depending on how you are paid, you can prove your income to a lender in a few ways.
The most common way is to provide all paychecks and pay stubs from the last 30 days to your lender.
If you are an independent contractor or 1099 employee looking for an auto loan, a lender will ask you to provide your tax returns from the past year or even two, depending on certain factors.
In many cases, a lender will run your pay stubs or returns through an e-verification system.
If you have bad credit, most lenders will want to see that you have remained at your current position for six months or more.
Along with proof of income, there are a few other things a lender will need to know:
- Credit Score and Report– Your credit score and report are the single biggest factors that impact your ability to qualify for an auto loan. If you have an excellent credit score, you may not be required to show a lender proof of income.
- Down Payment– All bad credit consumers will be asked to provide a down payment. Typically, a down payment will be $1,000 or 10% of the purchase price of the vehicle.
Pricing- Auto lending is on a case-by-case basis. If you have low income and poor credit, chances are a lender will not approve you for a brand new luxury car.
If you decide to finance your next car purchase and have a stellar credit score, a lender may not even ask you for proof of income.
For consumers who have less than perfect credit scores, there may be some additional steps.
Consumers with bad credit may be asked to provide anywhere from six to twelve references. These references do not need to live near you or even in your state.
The lender will contact these references in case they are unable to locate you.
All in all, almost any bad credit auto lender will ask you for proof of income to ensure you can afford to purchase a certain vehicle.
If you are looking to buy a new car but have less than perfect credit, CrediReady can help.
Our nationwide network of trusted dealers and verified lenders work with buyers in all credit situations. Take a moment to fill out our free no-obligation loan inquiry form and start shopping for your dream car today!