Which documents should you prepare for second- or third-chance auto financing?

Photo ID, address and banking information

First, to verify your identity, it is important to have a photo ID, alongside your address and your banking details.

Your driver's licence fully meets the first requirement and is also needed for insurance purposes, so it is a very important document.

Then, utility bills, such as a phone bill or a lease in your name, will serve as proof of residence and confirm the address on your driver's licence.

A void cheque or a bank statement is often the best way to provide your banking information to set up payments and link them to your bank account.

Proof of income and employment stability

Proof of income for auto financing generally takes the form of 2 or 3 recent pay stubs, bank statements from the last 3 months showing your payroll deposits, tax slips (T4 or RL-1) and/or a letter from your employer confirming your position and seniority.

The number of proofs required can vary by lender. It is, therefore, always worth keeping as much supporting documentation as possible on hand.

In general, self-employed workers must present more documents than salaried employees to confirm employment stability.

Additional proof could also be required if you want a first car loan without a credit history. The dealer is available at every step of the auto financing process.

The documents for second-chance financing do not necessarily change, but they may be more detailed.

For example, the lender could ask for more proof of income or request a few personal references (contacts or relatives).

The documents for third-chance financing remain the same, but adding a co-signer or a guarantor could be required before the loan. Sometimes, certain lenders might also require a down payment.

In short, the documents for auto financing do not change for second- or third-chance credit, but it is possible for the lender to have additional requirements.

Salaried employee, self-employed or variable income

For a salaried worker, the lender will often require 2 or 3 pay stubs, tax slips (T4 and/or RL-1) and, sometimes, a letter from the employer confirming your position.

For a self-employed worker or someone with variable income, several proofs are often needed to better establish income stability.

For example, you could provide Notices of Assessment for the last 2 years, your company's financial statements, or bank statements.

In short, a salaried worker will often need fewer proofs to meet a lender's requirements to verify job security and stability.

The first step if you are missing a document for your auto financing is to contact the lender to explain the situation.

Generally, it will be possible to propose a suitable alternative. For example, another utility bill (phone or electricity) as proof of residence, or a Notice of Assessment instead of pay stubs.

Your loan application could, therefore, be accepted without a pay stub, depending on the agreement reached with the lender.

Otherwise, asking for a short extension and setting a specific date when you will be able to present the document is usually an excellent way to settle the situation without unduly delaying your car loan.