You have been denied an auto loan and are wondering what the next steps are. If your credit score is too low, or you don’t have a steady or reliable monthly income, getting approved for a loan may be tough. However, you can do several things to make yourself more attractive to lenders.
Contact the Lender
If you were denied an auto loan, the first thing to do is contact the lender. Ask for an explanation of why your application was denied and if anything else can be done. If they say no, ask if they would be willing to re-evaluate your application in six months or so when they have received more income documentation.
If a loan officer tells you that he or she cannot help but recommends another lender, thank them for their time and move on.
Minimize Your Debt
You want to minimize your debt, so pay off any credit card and other auto loan balances as soon as possible. While it may seem like a good idea to use your savings account to pay down these debts, this can actually hurt you if it leaves little or no money in the bank.
If you don’t have enough cash available for a down payment on a new car and still owe money on an older one, consider selling the old vehicle before buying another one so that both vehicles are paid off at once.
Work on Improving Credit Score
If your credit score is dismal, work on improving it. This can be done by paying off any outstanding debts, such as credit cards and loans, and ensuring that all your bills are up-to-date.
If possible, try to get a secured credit card so you have an additional line of credit when needed. You will also want to ask for an increase in your current line of credit or lower interest rates on any revolving accounts (such as department store accounts).
Consider Refinancing Your Current Car Loan
If you have bad credit car loans Alberta with the same lender, consider refinancing your current auto loan. The process is similar to applying for a new loan. You need to fill out an application and provide proof of income and creditworthiness.
If approved, the lender will transfer your existing balance from the old loan onto its own account. They will then issue you a new vehicle financing agreement that reflects their rate, term and payment requirements. This could mean lower monthly payments or lower interest rates (or both).
Look for Poor Credit Lenders
If you have been denied an auto loan, it’s time to look for a lender that specializes in bad credit auto loans. A lender specializing in subprime lending may help you get approved for an auto loan even if your credit score is low.
In some cases, lenders who specialize in subprime lending will offer better interest rates and terms than those who don’t. This can be especially true if the lender is willing to give up some of their profits by offering lower rates on loans with higher risk factors.
If you were denied an auto loan, it’s important that you don’t panic. A lender may turn you down due to factors such as credit score or income level. The good news is that bad credit car dealers can help you get approved for an auto loan. They specialize in bad credit loans, so keep checking.