Stips (Stipulations)
What are stips on a car loan?
Stips, short for stipulations, are the documents a lender requires before it releases the money on an approved car loan — usually proof of income, proof of residence, proof of insurance, and 5 to 8 references. Until every stip clears, the approval is conditional. Most subprime deals that fall apart fall apart here, not at the credit decision.
Key takeaways
- Stips is dealer and lender shorthand for stipulations: the conditions attached to an approval before funding.
- An approval is a decision about your credit file; funding is a decision about your documents, and they are separate tests.
- The usual subprime list is proof of income, proof of residence, proof of insurance, proof of phone, 5 to 8 references, and an employment verification call.
- Assembling the documents before you shop is the most effective thing a bad-credit buyer can do to keep a deal from collapsing after signing.
What does "stips" mean?
Stips is short for stipulations — the list of documents and verifications a lender attaches to an approval before it will send the money. You will hear it across the desk, usually without anyone defining it.
What it implies is the important part. An approval is not a decision that you have the loan. It is a decision that you have the loan if the application turns out to be true and provable. The stips are the proving.
The usual list
| Stipulation | What satisfies it |
|---|---|
| Proof of income | Recent consecutive pay stubs with year-to-date totals |
| Proof of residence | A utility bill in your name at the address on the application |
| Proof of insurance | A binder listing the vehicle and the lender as lienholder |
| Proof of phone | A bill in your name matching the number you gave |
| References | 5 to 8 names with working phone numbers |
| Employment verification | A phone call to your employer |
Every item serves one of two purposes: confirming the income is real and repeatable, or confirming you can be located.
Why it matters more than the score
Because the deals that die at this stage were already approved. A lender can approve a 520 score without hesitation and then decline to fund when the stubs do not support the payment, or when the references do not answer, or when the employer will not confirm.
This is also why an approval you received before handing over documents is not final, and why taking the car home before funding — spot delivery — leaves you exposed to being called back in to re-sign.
Full treatment, including what to do if you are self-employed or paid in cash: what are stips on a car loan. Related: payment-to-income ratio and yo-yo financing.