So you’ve been shopping around for a great used car. You found an awesome deal on a 2007 Civic with just 80,000 kilometers on the odometer, and you decide to pull the trigger. You sign the papers for a credit check at the dealership, and walk back in the next day to sign the loan, and drive off with your car.
But the salesman tells you you’ve been denied. Your credit score wasn’t good enough to qualify for a loan. Sure, you’ve had credit issues in the past, but you’ve been doing everything you can to rebuild! Now what are you supposed to do?
This is a common scene in Canada. Around 20% of all Canadians have a sub-par FICO score of 620 or lower, and can have difficulties securing car loans. So what are you supposed to do if your car loan has been denied due to bad credit?
Well, it’s not the end of the world. In this article, we’ll look at the next steps you can take after your car loan has been denied due to bad credit.
1. Start By Reviewing The Explanation Letter
If you’ve applied for an auto loan and been denied, you’re probably going to get an explanation letter. This is common practice for most lenders. The explanation letter will explain why you’ve been denied for a loan, and can be a very useful tool as you try to rebuild your credit.
There are many reasons that you could have been denied an auto loan, including:
- Poor debt-to-income ratio
- Past auto repossessions
- Application errors
- Lending restrictions
- Past-due bills
And many others. By reviewing the explanation letter and consulting your free yearly credit report, you can gain a better understanding of your credit, and see where you need to improve to get approved for an auto loan.
2. Consider Seeking Pre-Approval At A Different Bank Or Credit Union
Not every lender is the same. Being denied by one lender doesn’t mean you’ll be totally unable to secure a loan – it just means that a particular bank or lender decided that you were a bad risk. If you think that your credit score is good enough, you could consider seeking pre-approval from another bank or credit union.
If you sit down with a lender and explain your financial situation, and you bring in records and bank statements related to your income, debt, and other important factors, you may be able to get pre-approved for an auto loan, even if you end up with a high interest rate.
Now, if you look for pre-approval and get denied again, you shouldn’t just keep looking for other banks to lend you money. Seeking too many loans at once can further negatively impact your credit score, and actually reduce your chances of being able to secure an auto loan.
But don’t worry – there are other ways you can get an auto loan, even if you have bad credit.
3. Consider Finding A Cosigner
If you desperately need a new car, and you know someone who has good credit, you could consider asking them to cosign for the new car. When you cosign a loan with someone, you’re essentially sharing responsibility. If you don’t pay your car loan, your cosigner is going to be responsible for paying.
This allows banks and lenders to mitigate risk – if the cosigner has a good credit score, they’ll be relatively confident that they will be able to extract payment, even if the original signer of the loan defaults on their payments.
Now, cosigning is not always a good idea. If you fail to make your payments, your cosigner will be completely responsible – and you could severely damage their credit and cost them quite a bit of money if you fail to repay your loan.
However, if you’re in desperate need and you’re certain that you can afford your monthly payments, it’s certainly a valid option.
If you can’t find a co-signer, or you don’t want to get your friends and family involved with your debt, you still have a few more options.
4, Shop At A “Buy Here, Pay Here” Dealership
We don’t recommend this option – but this is where most people who are desperate for a car end up. A “Buy Here, Pay Here” dealership is any dealer that doesn’t work with banks. Instead, they lend individual car buyers their own, private lines of credit.
These dealers specialize in selling cars to individuals with bad credit – but because of this, you can expect to find poor quality vehicles, sky-high interest rates, or predatory loan conditions that end up costing you extra money.
Even if you’re desperate for a car, it’s a bad idea to shop at a buy-here, pay-here dealership. Lucky for you, there’s a better alternative if you’re in Winnipeg – or anywhere in Canada!
Got Bad Credit? Denied For A Loan Application? Shop At Ride Time Today!
Ride Time specializes in providing affordable used cars to Canadians with bad credit. We can almost promise you a great deal on a fantastic used car – even if you’ve been turned down elsewhere. We serve the greater Winnipeg area, and we can deliver our cars anywhere in Canada!
All we need from you is proof of 3 month’s employment, a valid Canadian driver’s licence, and take-home pay of $1,500/month before deductions. If you can give us these 3 things, we’ll work with our network of 15+ specialized lenders to secure you a reasonable rate on a fantastic used car.
So don’t worry. Even if you’ve been denied for a loan application elsewhere, Ride Time can help you get approved for a loan, and get back on the road.