How to Get an Auto Loan After You Were Rejected by a Lender
Every applicant dreads rejection for an auto loan - or a loan of any kind. While many people may consider it embarrassing, it may not be as bad as it seems. Learning from this setback may help you obtain a better loan in the future. By taking the right steps forward, you can make the best of a recent loan rejection.
Learn Why You Were Rejected and Fix the Problem
When your auto loan is denied, make sure you ask the lender for as much information as possible. Here are the most common reasons people get rejected for auto loans:
- Income level - It may be that your income after expenses does not meet the lender’s requirements for the loan you requested.
- Too much debt - If you have a variety of other debt - or just one or two large ones - a lender may not trust your ability to make the payments for the new loan. Lenders call this your “debt-to-income” ratio, which might be too high for their lending policies.
- Bad credit – Your credit score is important and determines whether your loan will be approved and the rate you are offered. Your credit history is an important factor a lender will consider before approving or denying a loan. If you have missed payments, made slow payments, or defaulted on other loans, you may need to repair your credit before a lender will consider you.
You cannot improve your chances of obtaining a loan if you do not know exactly why you were rejected. Once you know the problem, you can take steps towards a new and successful application.
If your main issue is your debt-to-income ratio, there are two ways to eliminate the problem. You can either increase your income or lower your debt. Since a change in income often requires a new job or promotion, it is usually easier to reduce balances by paying off a little more of each debt. Put more money towards eliminating debt – toward higher interest rate balances first. Or simply wait until you have paid off a significant amount of debt.
If your credit score is too low, the easiest first step is to check your credit history and make sure there are no mistakes. If you find an error, notify the major credit bureaus immediately so your report can be corrected. If your score is due to late payments or similar factors, improve your score by creating and maintaining habits of making payments on time.
Make a Plan & Reapply
Once you have fixed the problems the lender mentioned, be sure you meet the requirements before submitting another application, even to a new lender. It may be a good idea to ask someone to cosign the loan with you in case the lender is still hesitant to approve you. You would also increase your chances if you bring in a higher down payment. Submit a new application only after you have addressed the issues in the first rejection.
If you are ready to apply for a new auto loan in New Mexico, Del Norte Credit Union is here to help. Whether you are applying with us again or coming to us after a rejection from another lender, we want to set you up for success. Contact us today to find out if you meet the requirements for an auto loan or what you must do to obtain one. We’re here to help.