Consumer Car Buying Advice Blog

One of the requirements involved in the bad credit car loan process is gathering the required stipulations for the lender.

The process

At Auto credit Express, we realize that many bad credit car loan applicants, especially in the current economy, are probably unfamiliar with the loan process. Since we’ve been dealing with subprime auto lenders for over 19 years, we thought it might be helpul if we shared this information with you:

Documentation

If you have bad credit and plan on buying a car (we assume you’ve checked your credit report and know your FICO score), there are a few documents you will most likely need when you close your loan at the dealership. These documents are commonly referred to as “lender stips” (short for lender stipulations or requirements).

Auto finance companies and lenders use these “stips” to verify the data you entered on your credit application such as income, phone number, and address (this is important: if you have bad credit you will have to prove the accuracy of every item on the car loan application). The most common stips needed to buy a car with bad credit are:

Pay Stub

For normal W2 employees (this is the form regular employees receive each year from their employer showing your yearly income and total payroll deductions), a pay stub is usually enough to verify the income stated on the car loan application. If overtime wages make up a significant part of your income, the finance company may also request your W2 from the previous year that proves you receive overtime earnings in a regular basis.

W2 Form

W2 forms are requested to prove overtime income, especially if you are buying a car during the first four months of the year (since the first four months is not usually enough to demonstrate a solid pattern of overtime income). After that, the year to date income on your pay stub is used to verify overtime income. If you receive hand written pay stubs, lenders will often also ask for a W2 form.

Tax Returns

If you’re self employed, lenders require the last two years’ tax returns. These tax returns have to be completed by professional tax service. This makes buying a car with bad credit especially difficult if you’re self employed for less than 3 years.

Bank Statements

Automobile finance companies will rarely ask for bank statements. Sometimes they are requested if you have hand written pay stubs or are self employed, in order to further prove the income you stated on the credit application.

Telephone and Utility Bills

Utility bills are used to verify your address and phone number. If none of the bills are in your name, the lender will usually still request the telephone bill in order to verify the phone number at your address.

Other bills, such as credit card and bank statements, can also be used to verify your address as long as the bill is dated within 30 days of the date you finance your car.

References

Plan on bringing in a list of 4 to 6 references, including the addresses and phone numbers for each one. The list can include friends, family, co-workers, and employers.

Landlord

If you are renting, the auto finance company will require the phone number of your landlord (since, unlike mortgage lenders, most landlords don’t report your payment history to the credit bureaus). Make sure you are current on your rent payment before buying the car. If you aren’t, the lender may decline the loan.

The Bottom Line

If you have bad credit and plan on buying a car, you may want to gather the above documents and keep them handy. There’s a good chance you’ll need them when you close your auto loan at the dealership.

At Auto Credit Express, our business is to help people with bad, blemished, bruised and tarnished credit buy cars and reestablish their credit at the same time. For more information regarding the bad credit car loan application process, visit our web site at www.autocreditexpress.com.

Tags: car loan quote, chrysler employee discount, credit bureau, credit score, free car loan quote, gm, nissan versa

This entry was posted and is filed under New Cars. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.