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One of the most common questions that we get from our customers is whether they need to show proof of income for a car loan approval. The short answer to that question is yes, providing your lender with proof of income is standard practice for auto loans. The friendly car finance experts at PA Auto Credit explain why it matters and how to prove your income.
Why Proof of Income Matters
Your income is one of the factors that demonstrates to a lender that you have financial stability and the ability to repay your auto loan. It also helps lenders determine your interest rate and the loan amount that you qualify for. Without providing proof of income, it can be difficult for lenders to determine your creditworthiness, so you’re much less likely to be approved for a loan.
What You Can Use as Proof of Income for a Car Loan
There are a few different documents that count as proof of income. They include:
- Pay stubs: If you have a traditional W2 job, recent pay stubs are the most common form of income verification.
- Recent tax return: If you’re self-employed or have nontraditional sources of income, providing your most recent tax return is another way to prove your income.
- Bank statements: In some cases, bank statements that show that you have financial stability can replace pay stubs.
- Other documentation: Additional documents that can be used to prove your income include 1099 forms, disability benefits statements, and pension statements.