If you have questions about what happens if you were denied for a car loan, this post is for you. Getting declined for credit may be a frustrating experience.
Don’t despair.
Your loan application may have been rejected because of bad or poor credit—or FICA credit scores of 600 or below—so you need to look for another lender.
Use the following suggestions to improve your chances of getting a car loan:
Step #1: Check Your Credit Report
Check your credit reports from Experian, Equifax, and TransUnion at least 30-45 days before submitting an auto loan application:
- All U.S. consumers may request their free annual credit reports from all three credit reporting agencies (CRAs) on annualcreditreport.com
- Check each report for errors. According to the Federal Trade Commission (FTC), more than three percent of consumer credit reports contain errors that can keep you from getting approved for new credit.
- Send a written dispute to the CRA(s) along with supporting documentation.
- Allow at least 30 days for the CRA to respond to the dispute. You should receive notice in writing that the error was corrected.
Step#2: Use an Auto Finance Calculator
Consider your cash flow before applying for new credit. An auto finance calculator is a handy way to determine how much money you can afford to pay for a car (in total as well as monthly payment amount).
Paying your car loan payment on time and in full will improve your credit scores.
Step #3: Put Down a Larger Amount
Improve your chances of a new car loan by providing the dealer with more money down, with or without a trade-in:
- Increasing the down payment reduces the total amount of the loan. This can mean lower monthly payments or a shorter loan term for you.
- Putting a larger amount of cash down on your purchase may help the dealer, bank, or finance company to approve your auto loan.
Step #4: Think Ahead. Get a Co-Signer or Co-Borrower
Plan ahead. A co-signer or co-borrower with good to excellent credit can help you get approved for a new loan:
- Realize that the creditworthy co-signer agrees to repay or make missed payments if you don’t.
- A co-borrower has equal responsibilities and rights to the vehicle.
Step #5: Build Your Credit Before Applying for a Car Loan
Restore or establish a solid credit history first:
- Consider the state of your existing credit.
- Pay down high balances before applying for new credit. Vow to use now more than 30 percent of your total available credit.
- Make payments on time. Late payments harm your credit scores.
- Get a part-time job if you need extra cash. More money and cash flow can improve your income-debt ratio.
- Establish credit if lack of credit is an issue. New graduates or consumers with credit issues may need to open a secured credit card that reports to the three CRAs.
You’ll pay more for a car loan if you have fair to bad credit. A good credit track record may improve your car loan terms, such as length of the loan or annual percentage rate (APR).
Step #6: Compare Your Loan Options
Compare your available options before you make financial decisions:
- Contact your bank or credit union if you have a stable account and employment history.
- Ask prospective lenders about your chances of approval before submitting multiple applications. Submitting many auto loan applications at once can lower your credit scores by generating too many hard inquiries.
- Apply for auto financing with suitable lenders.
- Choose a lender that’s likely to approve your credit to avoid disappointment. A buy here, pay here dealership is a good choice for buyers who want to establish or rebuild their credit.
Apply for Your Second Chance Now
Shabana Motors provides car loans for drivers with all credit types, such as bad credit, poor credit, or no credit:
- We help good people who’ve been through a prior repossession or bankruptcy.
- Our process is both quick and easy. Apply for financing at the lot or online. Complete our secure application in just a few minutes.
Now that you know what happens if you were denied for a car loan, Shabana Motors wants to help you enjoy the privileges of ownership. Our buy here, pay here model can help you buy the ride you want now.