Auto Loan Denied After an Approval

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Content Manager

Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

, Content Manager - November 22, 2021

If you were approved for an auto loan, then later got a letter saying you were denied, there are usually two explanations.

Auto Loan Approved Then Later Denied?

If you go to a dealership for a car loan and apply with their finance department, your application may be sent to more than one lender. Most dealers are signed up with multiple lenders, and they likely send your information to more than one to see what options you qualify for. Some dealerships are even signed up with subprime lenders that specialize in assisting bad credit borrowers.

If you're told you're approved for financing, and later get a letter informing you that you're denied, then one of two situations likely happened:

1. Multiple Auto Lenders

Let’s say you apply for an auto loan at a dealership and your application is sent to three different lenders. One lender may approve you, while two deny you. Let’s say one did approve you for the car loan, so you agree to the terms and take delivery of the vehicle.

However, the other two lenders that denied you financing are still required to let you know that you were denied. If you see a letter in the mail saying you were denied financing, look closely at the name of the lending institution. If the denial letter is a different name than the lender you went with, you’re probably just receiving a denial letter from a different lender after you already took delivery.

2. Yo-Yo Financing

If you get a call from the dealership or a letter from a lender saying you were denied financing after you purchased your car, and the loan is no longer active, then you may be a victim of what’s called yo-yo financing.

Yo-yo financing happens when you take a vehicle home while the financing is still pending. Some dealers let their buyers take the car home while they wait for the financing to go through, but it sometimes doesn’t work out. If you applied for financing and took the vehicle home before you completed the whole process, you could be faced with a difficult decision.

You may be forced to change the terms of the loan that you originally agreed to if you want to keep the car. If you don’t want to change your terms, then you need to return it unless you can figure something out.

To avoid being put in this position, never take a vehicle home until you’re positive that the financing process is finished. Don’t leave any document unsigned, read through everything carefully, and don’t be afraid to ask questions during the process – this could prevent future heartbreak.

Denied a Car Loan?

If you keep finding yourself getting turned down for auto financing, then it may be time to look into alternative financing options. Poor credit is a common reason for being turned away for a car loan, and it can be frustrating after a while. However, there are lenders that specialize in working with tough credit situations, called subprime lenders.

Subprime auto lenders that are signed up with special finance dealerships examine more than just your credit rating. To see if you have the ability, stability, and willingness to repay a car loan, they request many items from you to get a better understanding of your entire financial situation – not just what’s on your credit reports.

Whether your bad credit is the result of bankruptcy, a past repossession, or some slipups in past payments, a subprime lender may be able to assist you in getting the vehicle you need. Finding a special finance dealer is how CarsDirect can help.

We’ve created a network of dealerships that are signed up with subprime lenders, and we’ve been matching borrowers to them for over 20 years. Get started today by filling out our free, secure, and no-obligation auto loan request form.


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, Content Manager

Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

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