When buying a new car, many consumers resort to a car loan. However, as with any loan, there are certain requirements for financing your desired car. You can find out what these are and how you can apply for a car loan in this blog.
The essentials in brief
In order to apply for a car loan, you must be at least 18 years old and reside in the United States. In addition, you must have sufficient creditworthiness and a regular income.
You can apply for a car loan through your local bank, a car dealer, or an online bank.
To increase your chances of getting a car loan, you can take on a second debtor, check and clean up your credit data, or reduce the loan amount.
Are you looking for a suitable car loan with favorable conditions? With our car loan comparison, you will find attractive offers for financing your next new car.
These are the common car loan requirements that an applicant must meet:
Sufficient creditworthiness is given.
Depending on whether you apply for a car loan online, at a bank branch, or at a car dealer, the following information and documents are usually required:
The applicant receives a regular income.
The borrower has his main residence in the USA.
The applicant is of legal age.
Important documents for car financing
Information about personal data and living situation
Information about the employer, type of activity, duration, and time limit
Copy of your identity card or valid work and residence permit
Current salary statements in the form of the most recent pay slips and bank statements or tax assessments for self-employed people
Proof of permanent employment via employment contract
Information relating to the vehicle to be financed: proof of purchase (copy of the purchase contract or registration certificate II), information about the vehicle (type and brand), date of first registration, and mileage for used vehicles
Creditworthiness and creditworthiness
Sufficient creditworthiness is one of the most important car loan requirements. However, it is not just income that is relevant. Instead, it is particularly about the balance between income and expenses. To check your creditworthiness, the lender uses a Schufa query. If there are negative entries, such as unpaid loans, your chances decrease. Finally, the lender uses your creditworthiness to determine the likelihood of getting your loan back.
Where to apply for a car loan
There are three ways to apply for a car loan. On the one hand, you can do this through a house bank or another branch bank. These usually have good offers, although some of them require the car as security. Until the loan is paid off, you must give the vehicle title to the lender. The second option is through the dealer. Like the house bank, dealers often retain ownership of the vehicle as security. However, they often offer zero percent financing. Last but not least, you can also apply for a car loan from an online or direct bank. These often have favorable conditions and generally do not require you to provide a vehicle registration document.
Did you know that, under certain circumstances, you can deduct the cost of the car loan from your taxes? In this information article, we reveal how it works.
These factors will lead to the rejection of the application.
Here are some of the reasons that can lead to car loan rejection:
Problems with Fico Score: If your creditworthiness is not sufficient or your ability to pay is considered uncertain, your application for the loan will be rejected.
Type of employment: Your loan application may also be rejected due to your employment. Self-employed people and freelancers generally have worse car loan requirements. This is especially true if you have only been doing the job for a short time.
The level of income: Even if you have a good Fico rating and a stable job, banks can reject your application based on your income. This happens if the loan amount you are applying for exceeds your financial capabilities.
Age: From your mid-60s onwards, your chances of getting a loan decrease. Banks want to make sure that you can pay off the loan with your monthly pension.
Under certain circumstances, it may make sense to prefer a classic installment loan to a car loan. You can find out what you need to pay attention to in our comparison of the two types of loans.