How do lenders verify the source of down payment for used car loans?

When you apply for a used car loan, financial institutions conduct a careful review to ensure compliance with laws, regulations and avoid financial fraud. They will request documentation to trace your down payment source.

You will likely be required to provide different months of banks statements showing the funds which the lender will be reviewing, for example, if the down payment funds were from your monthly salary. They may ask for copies of your salary slips or a letter from your employer, and/or if you have sold an asset, such as your property or used car, have your sale receipts or sales records ready.

Lenders also review your accounts for funds and large or unusual deposits. If you are putting in money that your savings account, lenders will want you to show the way you saved that money; in that case, you may have to provide, deposits slips, long term savings accounts or bonds.

It's easier to do this all if you have your financial paperwork set up. Being reasonably prepared will speed up your approvals and it provides the lender with an indication that you can plan your finances effectively. This, in theory may provide you with an advantage when loan conditions you are offered and interest rates.