Denied the auto loan? Here’s everything you need to know Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make better financial decisions by providing you with interactive tools and financial calculators as well as publishing original and impartial content. This allows you to conduct your own research and compare data for no cost – so that you can make informed financial decisions. Bankrate has agreements with issuers such as, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The deals that are displayed on this site are from companies who pay us. This compensation may impact how and where products appear on the site, such as such things as the sequence in which they appear in the listing categories and other categories, unless prohibited by law. This applies to our mortgage home equity, mortgage and other home loan products. This compensation, however, does have no impact on the information we publish, or the reviews appear on this website. We do not cover the vast array of companies or financial deals that could be open to you. yourstockbank/Getty Images
4 min read. Published October 12, 2022
Written by Kellye Guinan. Written Personal and business finance Contributor Kellye Guinan is an editor and writer on a freelance basis with more than five years of experience in personal finance. She is also employed full-time at the local library where she helps her community access information about financial literacy, in addition to other topics. Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are passionate about helping readers gain the confidence to control their finances by providing concise, well-studied information that breaks down otherwise complex topics into manageable bites. The Bankrate promises
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We make sure that everything we publish will ensure that our content is reliable, honest and reliable. Our loans reporters and editors concentrate on the areas that consumers are concerned about the most — different kinds of lending options and the most competitive rates, the most reliable lenders, the best ways to pay off debt and many more, so you’ll be able to feel secure when making a decision about your investment. Editorial integrity
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If you have questions about money. Bankrate has the answers. Our experts have helped you understand your money for over four decades. We strive to continuously give our customers the right guidance and the tools necessary to succeed throughout life’s financial journey. Bankrate adheres to strict standards standard of conduct, so you can rest assured that our content is honest and precise. Our award-winning editors and journalists produce honest and reliable content that will help you make the best financial decisions. The content we create by our editorial team is factual, objective and is not influenced through our sponsors. We’re honest about how we are capable of bringing high-quality content, competitive rates and helpful tools to you , by describing how we earn money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We receive compensation for the promotion of sponsored goods and, services, or through you clicking specific links on our site. So, this compensation can affect the way, location and when products are displayed within the categories of listing and categories, unless it is prohibited by law. We also offer loan products, such as mortgages and home equity, and other products for home loans. Other factors, like our own website rules and whether a product is available in your region or within your self-selected credit score range can also impact how and where products appear on this website. We strive to offer the most diverse selection of products, Bankrate does not include specific information on every credit or financial product or service. A car loan application could be rejected due to your credit score or financial circumstances. But by reaching out to your lender and improving your financial situation, you can work on creating an application that will not be rejected in the future. Why did I get denied a car loan? The majority of lenders reject applicants due to their credit score credit history, credit history and overall debt. Incorrect information on the application could be denied an loan because of simple mistakes in the application. If you do not complete a section or note information incorrectly lenders could deny you without giving you the chance to correct inaccurate information. Make sure you review every aspect of your application to ensure that you have all the information you need. You might be able to apply for a second time, but accuracy the first time around will save you time. A low credit score is a common problem for lenders. have minimum credit scores in order to meet their eligibility criteria. In general, lenders prefer for fair creditwhich is a score of 620 or greater. If your credit score is lower than the required score then you’ll be immediately denied. There are . However, they will cost you more over the long term and might have higher costs -for example, the origination fee or prepayment penalty that are higher than traditional auto loans. Limited credit history If you have a limited or no credit background, lenders won’t be able to gauge your ability to make the future auto loan repayments. They could use this as a reason for denying your application. Unfortunately, it will take time to amend this. It is necessary to take on additional smaller debts in order to build your credit score prior to applying again or with a co-signer. A large amount of debt If you have a lot of debt through other loans as well as credit cards in the meantime, your DTI ratio — also known as debt-to-income ratio — will be greater. If you have a DTI ratio of 50% or higher is considered to be a signal of danger and can cause rejection. The process of paying down debts is the best way to reduce your DTI however, if you’re able, a second source of income can reduce your DTI. What to do if you were refused an auto loan One rejection isn’t the end of the world. Consider a few steps prior to applying again to increase your chances of being approved. Contact your lender Lenders must explain the reasons why the application was rejected. If the application isn’t sent automatically, request to receive it in the 60-day period following your application. In the event that it is not sent, it falls out of the Equal Credit Opportunity Act. If it was something as simple as an application error, you can make adjustments and reapply. If the cause was your credit score or any other financial obligations, you are able to work on improving them prior to applying again. Improve credit score Your credit score is one of the most important factors that lenders look at when they consider granting you a loan. Be sure to spend time checking your credit report and making sure you pay your debts on time and decreasing your credit utilization ratio. This can take a few months. If you’re in a rush take a look at other options as you work to improve your score. But once you’ve built up a solid recent repayment history the lenders will consider you as less risky. Be mindful of your debt. Keeping it low and reducing your debt is the key to getting future lenders. It is important to pay down your current debts while also avoiding any new loans and credit card purchases. Review your budget and try to remove any unnecessary expenses before applying again. It is also a great method to reduce your debt-to-income ratio (DTI), which lenders use to determine if you can comfortably afford the new loan to pay. Find lenders with poor credit scores. There are lenders that are willing to accept . This could be a method to get you behind the wheel sooner rather than later. These lenders market specifically to drivers with low credit scores. However, you must be aware of the options and be aware that auto loans for those with bad credit tend to have more expensive interest rates which could cost you thousands in the long term. Other options Your choices don’t necessarily depend on the ability of you to quickly improve your credit score or reduce the amount of debt you have — although each can be helpful. “Buy here, pay here” dealers BHPH dealership may not be perfect, but it can be a good option for those with a low credit score and are in desperate need of a vehicle. BHPH dealerships both finance and sell the cars on their lots. Credit approval standards tend to be lower, as well as the procedure is quicker than traditional loans. However, interest rates are high and there are fewer vehicles available. Joint auto loans A joint auto loan is when you and someone else — typically a partner or spouse — share the responsibility for the car loan. The lender will take into consideration both income and credit scores when deciding on an approval. Joint applications can result in a lower rate as well as the chance to take on an additional loan because of the added income. Auto loan co-signed loan A co-signed auto loan can be described as a loan where you still carry the full responsibility of the monthly payments but have another person supporting the loan. As with the joint auto loan the credit history as well as the co-signer’s credit history are considered when you apply. This increases your chance of approval, which could translate into more and better terms. In the end, if you’ve been rejected, take a step back. Your lender must provide you with a letter explaining the reason you were denied. Like everything else related to finance, preparedness is key. The next time you make an application to a lender, research the situation be aware of your credit score and decrease your overall debt prior to time. This will ensure that your application is as perfect as it can be before you present it to the lender. Learn more
Written by personal and business finance contributor Kellye Guinan is a freelance editor and writer who has more than 5 years experience working in the field of personal finance. She’s also employed full-time at the local library where she helps her community access information about financial literacy, as well as other topics. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate from late 2021. They are passionate about helping readers gain the confidence to take control of their finances through providing clear, well-researched information that breaks down complex subjects into bite-sized pieces.
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