You’ve been denied an 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 choices by offering interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct your own research and compare data for no cost – so that you can make sound financial decisions. Bankrate has partnerships with issuers such as, but not restricted 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 that pay us. This compensation can affect the way and where products are displayed on this site, including such things as the order in which they appear in the listing categories, except where prohibited by law for our mortgage, home equity and other products for home loans. But this compensation does affect the content we publish or the reviews that appear on this website. We do not include the entire universe of businesses or financial offerings that might be accessible to you. yourstockbank/Getty Images
4 min read. Published October 12, 2022
Kellye Guinan Kellye Guinan. Written personal and business finance writer Kellye Guinan is an editor and writer freelance with more than five years of experience in personal financial planning. She also is employed full-time at the local library where she assists people in her community gain access to information on financial literacy, as well as other subjects. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are passionate about helping readers gain the confidence to take control of their finances with precise, well-researched and well-researched data that breaks down otherwise complex subjects into bite-sized pieces. The Bankrate promises
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We make sure that everything we publish will ensure that our content is reliable, honest and trustworthy. The loans reporter and editor concentrate on the areas that consumers are concerned about the most — the various types of loans available, the best rates, the best lenders, how to pay off debt and much more. So you’re able to be confident about investing your money. Integrity in editing
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You have money questions. Bankrate can help. Our experts have helped you understand your finances for more than four decades. We are constantly striving to provide consumers with the expert guidance and the tools necessary to make it through life’s financial journey. Bankrate follows a strict , so you can trust that our content is truthful and accurate. Our award-winning editors and journalists create honest and accurate information to assist you in making the best financial decisions. Our content produced by our editorial team is factual, objective, and not influenced by our advertisers. We’re open about the ways we’re in a position to provide quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated for placement of sponsored products andservices or through you clicking specific links on our website. Therefore, this compensation may influence the manner, place and in what order products appear within listing categories in the event that they are not permitted by law. We also offer mortgage, home equity and other home loan products. Other factors, like our own proprietary website rules and whether the product is available within the area you reside in or is within your own personal credit score could also affect how and where products appear on this site. While we strive to provide an array of offers, Bankrate does not include information about every financial or credit products or services. An auto loan application could be rejected because of your credit history or financial circumstances. But by reaching out to your lender and improving your financial situation it is possible to work on creating an application that will not be rejected in the near future. Why did I get refused a car loan? The majority of lenders reject applicants due to their credit score credit history, credit history and overall debt. There are mistakes in the application. You can be denied the loan because of simple mistakes in the application. If you do not complete a section or record information incorrectly, lenders may reject you without giving you the opportunity to correct inaccurate information. Be sure to review every detail of your application to ensure that you have all the information you need. You may be able to reapply again, but accuracy the first time can save you time. Poor credit score Most lenders have an upper limit on credit scores in order to meet their criteria for eligibility. In the general case, they want for fair credit -that is, scores of 620 or greater. In the event that your score falls lower than the required score and you are not able to meet the requirements, you will be refused. There are . But these will cost more in the long run , and might have higher costs — like origination fees or prepayment penalties — than standard auto loans. Limited credit history If you have a limited or no credit history, lenders will not be able to gauge your ability to pay for future auto loan installments. They could use this as a reason to reject your application. It will take some time to change this. It is necessary to take on other smaller debts in order to build your credit score before applying for another loan, or apply with a cosigner. A large amount of debt If you’re carrying a large amount of debt that you have accumulated by different loans and credit card, your DTI ratio — or debt-to-income ratio — will be higher. An DTI proportion of 50%% or higher is considered to be a warning sign and could cause rejection. The process of paying down debts is the most effective way to lower your DTI, but if you’re capable, another source of income could reduce your DTI. What do you do if you were refused an auto loan A rejection isn’t an end in itself. Consider a few steps prior to applying for a loan again to increase your chances of being approved. Contact your lender Lenders are required to explain the reasons why the application was rejected. If it isn’t automatically sent you can request to receive it in the 60-day period following the date of your application. Otherwise, it will fall outside of an exemption to the Equal Credit Opportunity Act. If the cause was as easy as an application error, you can make adjustments and reapply. If the issue was due to the credit rating or other debts, you can improve them before you apply again. Improve your credit score. Credit score among the most important factors that lenders look at when you apply. Take the time to by reviewing your credit report, paying your debts on time and decreasing the ratio of your debt to credit. This will take a few months. If you’re trying to get a loan in a hurry think about other options while you work on improving your credit score. However, once you’ve earned an impressive repayment record and have a good credit score, lenders will view you as less risky. Be mindful of your debt. Keeping it low and reducing your debt is key to being able to attract the attention of future lenders. The focus should be on paying down your debts currently and keeping clear of new loans and credit card purchases. Check your budget and attempt to remove any unnecessary expenses before applying again. It is also a great way to minimize your debt-to-income ratio (DTI), which lenders employ to determine if you’re able to comfortably pay for the new loan payment. Find lenders with poor credit scores. There are lenders who are willing to accept . This may be a means to be able to get behind the wheel sooner instead of later. These lenders market specifically to those with poor credit scores. But, be sure to compare your options as auto loans for bad credit tend to have more expensive interest rates which could cost you thousands over the long term. Alternative options The choices you have hinge on how you can swiftly improve your credit score or reduce your debt — though they can both be beneficial. “Buy here pay here” dealers BHPH dealership may not be the perfect choice, but it can be a viable alternative if you have a low credit score and are in desperate need of a vehicle. BHPH dealerships also finance and sell the cars on their lots. Approval standards for credit are generally lower as well as the procedure is quicker than traditional lending. But interest rates are very high and there are not many automobiles that are available. Auto loans that are joint loans An auto loan is where you and someone else usually a partner or spouse — share the responsibility for the car loan. The lender will consider both incomes and credit scores when making an approval decision. Joint applications can result in a lower interest rate and the ability to take on an additional loan due to the additional income. A co-signed car loan Co-signed car loan is when you still carry the full responsibility of your monthly payments, but you have someone else to back the loan. Like with a joint auto loan, both your credit history and your co-signer’s credit history are considered during the application process. This will increase your chances of approval, and could mean more and better terms. The main thing to remember is that if you’ve been denied, take the time to think about it. Your lender should provide a letter stating why you were rejected. Like everything else related to financial matters, being prepared is essential. When you next apply to a lender, research the situation and keep an eye on your credit score and lower your overall debt prior to time. This will help ensure your application is as perfect as it can be before you present it to a lender. Learn more
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Written by Personal and business finance contributor Kellye Guinan is a freelance editor and writer with over 5 years experience working in the field of personal financial planning. She is also a full-time worker at her local library, helping her community access information about financial literacy, among other subjects. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers gain the confidence to control their finances through providing precise, well-researched and well-organized facts that break down otherwise complicated topics into digestible pieces.
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