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The world of vehicle finance can be very confusing to the average person. If you do not finance cars often, you may be a little overwhelmed by all of the jargon and information involved. Here are a few of the more commonly asked questions regarding car finance.
What Information Do I Need to Apply?
When applying for an auto loan, you probably need several different pieces of information for the lender. You will need income documentation such as pay stubs, bank statements or tax returns. You'll also need to personal information like your name, Social Security number, address and phone number. In some cases, the lender will also want to know information about the vehicle such as the make, model, and year. You'll also have to know how much you want to borrow.
Will I Need a Cosigner?
If you are applying for a loan with bad credit, you may need a cosigner to be able to get approved. If your credit is good on its own, then you shouldn't need a cosigner to work with. You may want to get a copy of your credit report before you apply so that you can see whether your score is good enough to apply on your own. If you bring a cosigner into the process, keep in mind that he or she will be equally responsible for your debt. This means that you could put the cosigner in an awkward position if you do not pay your bill.
Do I Need Gap Insurance?
Most of the time, when you apply for a new auto loan, the lender will ask if you want to add gap coverage. Gap coverage is a type of insurance that pays the difference between what your car is worth and what you owe if you are in a wreck. This helps protect your financial position so that you are not forced to pay back an auto loan on a car that you cannot drive. Typically, buying gap insurance is a good idea if you are buying a new car. New cars depreciate very rapidly and you want to make sure that you don't owe more than what your car is worth shortly after buying the car. It will add a little bit of extra money to your payment each month, but it is usually worth the minimal cost that comes with it. Otherwise, you're putting yourself at risk.