Turned Down for an Auto Loan?

Get Car Financing
Even with poor credit.

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - March 14, 2018

Bad credit can mean trouble when it comes to things like renting a home or financing a vehicle. If you’re reeling from an auto loan rejection, take a moment to plan your next move.

Know Why They Said No

When a borrower has credit issues, it’s important for them to go to the right lender for their situation. In most cases, this means visiting a special finance dealer that can work through a subprime auto lender. These lenders look beyond credit scores and qualify borrowers based on factors such as strength of income, employment, and residence.

Not all dealerships work with subprime lenders, so make sure to research dealers before visiting. Even if a lender can work with bad credit, it doesn’t mean that everyone with bad credit will get approved. Applicants still have to meet specific qualifications, which typically include:

  • A minimum monthly W-2 income of $1,500 to $2,000 before taxes, and proof with computer-generated check stubs showing year-to-date income.
  • At least six months on a current job, with a steady employment history of at least three years.
  • Proof of residence from a utility bill in the borrower’s name, at the address listed on the application.
  • Proof of a working landline or contract cell phone from a national carrier (pre-paid plans usually aren’t accepted).
  • Six to eight complete personal references with names, addresses, and phone numbers.
  • A down payment.

If a borrower meets all the lender-specific requirements, there are still reasons they could be turned down. Perhaps the borrower had such a thin credit file or low score that a lender wasn’t confident they’d successfully complete the loan. In addition, an applicant’s credit may have shown multiple repossessions or habitual late payments. The point is, every borrower’s credit and situation are unique, and lenders won’t approve every borrower.

Know Where to Go Now

If a borrower wasn’t able to get approved for an auto loan, there are other options. Typically, this might include visiting a buy here pay here (BHPH) dealer. These dealers finance loans in-house and don’t rely on outside lenders. In fact, these dealers usually don’t rely on credit history either, and often don’t check it.

What a BHPH dealer does require from a potential borrower is enough income to make a down payment and loan payments, usually in person on weekly or bi-weekly basis. This can be both a plus and a drawback, depending on how convenient it is for a borrower to get to the dealership. Also, not all BHPH dealers report on-time payments to the credit bureaus, so this type of car loan may not help build credit.

Keep in mind that vehicles at BHPH dealerships are often older, higher mileage cars and interest rates are very high. These dealers always require a down payment and paying even one day late can result in repossession. A borrower should be prepared for these things before heading to one of these dealers.

Prepare to Try Again

Before trying again right away for a loan, a borrower that’s been turned down should take some time to rebuild their credit and plan a budget. Typically it’s a good idea to wait six months to a year before again applying for a car loan.

There are a lot of options for credit building, but the simplest is to make sure all bills are paid on time and in full. Other options include keeping credit card balances low, getting a secured credit card, or taking on a credit builder loan.

Budgeting will also help borrowers ensure that they’ll be able to take on a loan when the time comes. Research average prices for vehicles, keeping in mind that it’s not the time to finance a dream car. Use online tools to estimate loan amounts, payments, and debt-to-income and payment-to-income ratios so there won’t be any surprises when it’s time to try again.

When the Time Comes

If you’ve been turned down for an auto loan in the past, but are ready to try again, make sure you’re looking to the right lenders for the job. At CarsDirect, we have an extensive nationwide network of special finance dealers that have the lenders available to help people in challenging credit situations. Let us help you start down the right path, simply fill out our online auto loan request form to get started!

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


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