You’ve been denied to get an auto loan? Here’s everything you need to know Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial choices by providing you with interactive tools and financial calculators that provide objective and original content, by enabling you to conduct your own research and compare information for free – so that you can make financial decisions with confidence. Bankrate has agreements with issuers, including but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The deals that are displayed on this site come from companies that pay us. This compensation can affect the way and where products appear on this site, including for instance, the order in which they appear in the listing categories in the event that they are not permitted by law. This applies to our mortgage, home equity and other home loan products. But this compensation does have no impact on the content we publish or the reviews that you read on this site. We do not include the entire universe of businesses or financial deals that could be open to you. yourstockbank/Getty Images
4 min read Published 12 October 2022
Kellye Guinan Kellye Guinan Written by personal and business finance Contributor Kellye Guinan is an editor and writer freelance with more than five years’ experience in personal finance. She is also a full-time worker at her local library, where she assists people in her community gain access to information on financial literacy, in addition to other subjects. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are committed to helping readers to take control of their finances with concise, well-studied information that breaks down complex topics into manageable bites. The Bankrate guarantee
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This compensation could influence the manner, place and in what order products are displayed within the categories of listing, except where prohibited by law. This is the case for our mortgage, home equity and other products for home loans. Other elements, like our own website rules and whether the product is available in your region or within your own personal credit score could also affect the manner in which products are featured on this website. While we strive to provide a wide range offers, Bankrate does not include specific information on every credit or financial item or product. A car loan application might be denied due to your credit score or current financial situation. However, by contacting your lender and improving your finances and establishing a plan for making an application that won’t be rejected in the near future. Why did I get not able to get an auto loan? The majority of lenders reject applicants because of credit score credit history, credit history and overall debt. There are mistakes in the application. You may be refused a loan because of simple mistakes in the application. If you have missed a part or record information incorrectly, lenders may reject you without giving you a chance to amend inaccurate data. Be sure to review every detail of your application to ensure you are in complete compliance. You may be able to apply for a second time with the same information, but being accurate the first time around can save you time. Low credit score Many lenders require a minimum credit score in order to meet their criteria for eligibility. In general, lenders need to see fair creditthat is, scores of 620 or greater. If you have a credit score lower than the minimum, you will immediately be denied. There are . However, they will cost you more in the long run , and could have higher feessuch as origination fees or prepayment penalties — than standard auto loans. A poor credit history If you have a limited or no credit background, lenders won’t be able to determine your ability to pay for subsequent auto loan installments. They might use it as a reason for denying your application. However, it’s going to take time to rectify this. You will need to accept other smaller debts in order to build your credit history before you apply again, or apply with a co-signer. In the event of a large amount of debt, if you’re carrying a large amount of debt that you have accumulated by various loans as well as credit cards, your DTI ratio — or debt-to-income ratio will be greater. An DTI ratio of 50 percent or higher is considered a warning sign and could cause rejection. Paying down your debts is the best way to lower your DTI however, if you’re capable, another source of income can lower your DTI. What to do if you have been denied an auto loan A rejection isn’t the end of the world. Do a few things before applying again to boost the chances of getting approved. Make contact with the lender Lenders are required to provide you with the exact reasons the application was rejected. If your application was not automatically processed, request it within 60 days of your application. If not, it falls beyond the Equal Credit Opportunity Act. If it was something as simple as an application error, you are able to make changes and apply again. If the reason was you’re credit score, or any other financial obligations, you are able to make improvements before you apply again. Enhance your credit score. The credit score of your among the primary factors considered by lenders when deciding whether to approve your application. Be sure to spend time looking over your credit score, paying your bills on time and lowering your credit utilization ratio. It will take several months. If you’re looking for a loan quickly take a look at other options as you work on improving your credit score. However, once you’ve earned an impressive repayment record the lenders will consider you as less risky. Minimize your debt Lowering your debt is the key to attracting the attention of future lenders. The focus should be on paying your current debts and making sure to avoid new loans or credit cards. Examine your budget and make an effort to remove any unnecessary expenses prior to applying for. It is also a great option to lower your debt-to income ratio (DTI), which lenders employ to determine if you have enough money to be able to afford the new loan payment. Find lenders with poor credit scores. There are lenders who accept . This could be a method to get you on the road sooner rather than later. These lenders market specifically to those with poor credit scores. However, you must be aware of the options — auto loans for those with bad credit tend to have significantly higher interest rates, which can cost you thousands of dollars in the long run. Other options Your choices don’t depend on your ability to swiftly improve your credit and lower your debt — though both can certainly help. “Buy here pay here” dealers A BHPH dealership may not be the perfect choice, but it can be an option if you have a low credit score and are looking for a vehicle. BHPH dealerships finance and sell the cars on their lots. Approval standards for credit tend to be lower while the approval process can be quicker than traditional lending. But interest rates are very high, and there are less automobiles readily available. Auto loans that are joint loans The term “joint auto” loan is when you and someone else — usually a spouse and spouse — have equal responsibility for an auto loan. The lender will look at both incomes and credit scores when making an approval decision. A joint application could lead to a lower interest rate as well as the chance to obtain an additional loan because of the added income. Auto loan co-signed loan An auto loan can be described as a loan where you have the complete responsibility for the monthly installments, but with someone else backing your loan. Like with a joint auto loan the credit history and your co-signer’s credit history will be taken into consideration during the application process. This can increase the chances of approval, and could mean more and terms. The main thing to remember is that if you’ve been rejected, take an extra step. Your lender will need to provide a written statement that explains the reason for your rejection. As with anything related to finance, preparation is crucial. Next time you apply, do your research, keep an eye on your credit score and decrease your overall debt prior to time. This will ensure that your application is as perfect as it can be when you present it to the lender. Find out more
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Written by Personal and business financial contributor Kellye Guinan is a freelance editor and writer with over five years ‘ experience within personal financial. She’s also an employee full-time at her local library where she helps her community access information about financial literacy, in addition to other subjects. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate from late 2021. They are committed to helping readers gain the confidence to control their finances by providing clear, well-researched information that breaks down otherwise complicated topics into digestible pieces.
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