Applying for an auto loan isn't necessarily a one-time-shot kind of deal. Rather, if you're in the market for a new ride, you should comparison-shop different loan products to see what you qualify for and what kind of rates and terms you’re eligible to get. If you get denied by one lender, ask when you can reapply -- creditors have to let you know why they turned you down within 60 days of rejection -- or try another creditor right away. If you're denied by several lenders, how long you wait to reapply will depend on the reason for the declines and your ability to fix the problem.
If you’re turned down for a loan because you have bad credit, take steps to repair your credit to a point at which you'll qualify the next time you seek financing. How long this takes will be based on what your particular credit issues are. If there’s a mistake on your credit report that’s lowering your score, it's a matter of notifying the three big credit bureaus -- Experian, Equifax and TransUnion -- substantiating the error and waiting for the correction to be reflected in your report. If it's a matter of legitimate late payments or collections, you may have to make several months of on-time payments to improve your score to a level deemed acceptable by a lender before you reapply. How long this takes depends on what kind of shape your credit is in.
Auto lenders examine your debt-to-income ratio when deciding whether to make you a loan. This figure is calculated based on how much money you earn vs. how much money you spend on debt repayment. If your figures are off from what the lender deems an acceptable range, you may have to pay down some existing debt or save up for a larger down payment to balance the figures. Ask lenders directly what your debt-to-income ratio needs to be to qualify for the type of loan you're seeking and make a concentrated effort to work toward that number. How long this takes and how quickly you can reapply depend on how fast you can pay off debt or save up for a more significant down payment.
Other Finance Options
If you were turned down by a car dealership, approach a private bank -- or vice versa. Lending standards may be different, and if you have any type of credit issues in your past, you may find better luck with a different entity, particularly one that specializes in financing people with sub-par borrowing histories. It's always a good idea to start your loan comparison-shopping with the banks you use for your checking and other personal accounts or past loans. These institutions already have an existing relationship with you and may be willing to work with you in financing a car if you’ve been declined elsewhere.
Making the Best Choice
Having a reliable vehicle can be essential to holding a job or traveling back and forth to college, and car-financing companies understand this and capitalize on it. Regardless of the pressure you may feel if you’re denied for a car loan, think long and hard before you reapply and are tempted to accept a super-high interest rate or an excessively long loan term. If it's possible, delay a car purchase temporarily and take public transportation or carpool until you get your finances under control and can qualify for a traditional car loan with competitive financing.
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