What to do if you were denied an auto loan
Quick insights
- Being denied an auto loan doesn’t mean it’s impossible to get one in the future, as there are ways to help improve your chances of approval.
- Common reasons for getting denied an auto loan can include a low credit score or insufficient income.
- Adding a co-signer or researching other loan options may be a helpful step towards finding an auto loan that you may be able to get approved for.
You’re ready to get your car and hit the road, but there’s one problem—your auto loan application was denied. What do you do next? Let’s get into the twists and turns that come with auto loans and how to navigate them if you’ve been denied.
What to do if your auto loan application is denied
Receiving a credit denial is never fun, but it can be important to review the denial letter from your lender to learn the reasons why you weren’t approved. This can give you some insight into what you can do next. It can be helpful to reach out to the lender to discuss this in more detail as well as explore potential alternatives and solutions.
You may also want to examine your credit report for any errors or issues that may have contributed to the denial. If you find an inaccuracy, it can be beneficial to dispute this and report it so that your report can be fixed and accurate. This way, whenever you apply again, your report will be updated and better reflect your financial standing. Your credit score may improve if an incorrect negative mark is removed from your credit report.
If you were denied due to a low credit score, it may be worth focusing on improving your credit, if you have the time. Your credit plays a large part in your ability to get approved for a loan, so the better your credit and credit score, the higher your chances may be of getting approved for an auto loan. Some ways you can improve your score include making payments consistently and on time, lowering your credit utilization ratio and limiting your credit card applications.
Finally, it could be helpful to consider other lenders and financial institutions that offer loans with fewer restrictions so that you may have a better chance of getting approved. You may also want to consider adding a co-signer to your next loan application, as that can help your odds of getting approved.
Reasons you may have been denied for an auto loan
Common reasons for a denied auto loan can include but are not limited to:
- Low credit score and/or poor credit history
- High debt-to-income ratio
- Insufficient income or employment history
- Negative marks on your credit report, such as bankruptcy or foreclosure
- Incorrect and/or missing information on your loan application
Other auto financing options
If you’ve been denied an auto loan, you may have other options available to you. You could research alternative loans from credit unions or other lenders that may be more flexible with their lending criteria. You may also consider going with an auto dealership that provides buy-here-pay-here options with in-house financing, which may come with its own benefits and offers.
Depending on the type of loan you’re looking to apply for, you could also consider adding a co-signer to your loan. A co-signer is someone who becomes primarily responsible for the payments should you be unable to make them. Adding a co-signer could help improve your chances of getting approved for an auto loan that you may have previously been denied for.
Conclusion
Getting denied for an auto loan can be frustrating, but it doesn’t mean you won’t qualify for other loans or be able to improve your financial or credit situation. Researching alternative options and working towards raising your credit score can help improve your chances for approval in the future.
