You’re probably familiar with a car loan, you get given money by someone to buy a car and then pay them back later. however you may not be familiar with car loan underwriting despite it being a key part of the car loan process. Well worry not, this article will explain everything you need to know.
What Is Underwriting?
To Put it simply, underwriting is the manual process of reviewing a potential lendee’s financial situation and history and determining their potential risk level. They do this by checking credit score, credit history and closely examining the application itself and comparing it to the facts to make sure everything adds up.
Underwriting is a process that happens after the initial loan approval, meaning it’s not the part where they confirm or deny the loan, rather the point at which they assess how much extra on the loan they’re going to charge as potential damages based on the lender’s history.
The underwriters rarely if ever interact directly with the customer, instead if they require any additional paperwork like payslips or proof of employment they’ll request it of the customer facing team who’ll then request it of the potential borrower.
What This Means For You
If you’re applying for a loan then the underwriter, whoever it may be, is directly responsible for how much your loan is going to cost, so what you want to do is look as good as possible to this person and make their job as easy as possible.
Make sure you provide as much documentation as you can, redundancy is fine, the more information you give them the smoother the process will be. The key things they’ll need are proof of your income and proof of your employment, basically proof that you’re capable of paying off the loan.
If you’re self employed then you’re going to have to get creative, tax returns could work if you can show from the last few years of tax returns that you make a consistent income that could counter the fact that you don’t have any payslips.
More than that though you’ll want to examine your own credit score and credit history before someone else does, order a free credit report and see what’s what.
You’ll be able to tell if there’s any errors, an underwriter only has the paper to go on so if they see something that’s wrong they’ll just assume it’s correct. If a loan hasn’t been marked as paid properly or something else that could be interfering with your credit score is wrong make sure you get it fixed before the underwriter ever has a chance to see it.