What if my own bank turned me down?

It happens. You applied for a loan with your bank, expecting to get approval to purchase a much-needed vehicle. However, instead of financing, you received a rejection letter. Take a deep breath—this isn’t the end of the road.

If your bank turned you down for an auto loan, you still have options. Start by finding out why your bank turned you down. Then, with that knowledge in hand, consider your other options to get the vehicle financing you need.

Find Out Why

If your bank turned you down for a car loan, they should provide some insight as to why you weren’t approved. Car loan approval rarely boils down to a single event in your credit history or a single metric, like a credit score.

Most borrowers think about their credit score first, and, indeed, it plays a role in approval. But it’s not the only factor. After all, your credit score is a number that attempts to summarize all other aspects of your credit history.

Additional important factors are your work history and current income, whether you’ll be able to put money down (and how much), and which vehicle you seek to purchase. We’ve written about each of these elements extensively and encourage you to read more.

From a lender’s perspective, two major credit events can affect approval: bankruptcy and repossession. A bankruptcy in your recent past is an important but general warning sign for creditors.

(As with all elements of your credit report, banks and other lenders are most interested in what’s happened recently because they’re assessing the risk of lending money to you right now, not ten years ago.)

A more specific and challenging note in your credit history is a vehicle repossession. Even though, from a financial perspective, it represents a “smaller” credit event, it’s more specific to your immediate request of car loan financing.

Every borrower is entitled to one annual free credit report from Canada’s major credit reporting agencies, Equifax and TransUnion. Request each agency to mail you a copy of your report here and here. This report will give you a better sense of your current debts and any late payments on your record.

Compare your free credit report to information you receive in your bank’s rejection notice. Once you know why you were turned down, you’ll have a better sense of your options for securing a loan.

What to Do after Your Bank Turns You Down

1. Try another Bank or Credit Union

If you’re on the fringe of securing an auto loan, another bank may offer approval. In general, larger commercial banks are less likely to approve your loan than smaller, local banks. That’s because local businesses have a better sense of local economic events—like a recent factory layoff—that may affect the superficial creditworthiness of otherwise reliable borrowers.

Alternatively, try a local credit union. Credit unions exist to serve their members, and they’re another good option if you’re running out of luck at local banks. Because helping members is their primary goal, they usually are more willing to take time to listen to your specific situation and, in many cases, can offer a better rate than major banks.

Be aware, however, that getting financing is not as simple as rejection or approval. Every borrower falls along a spectrum, and you may get approved—but only at an intolerably high rate. It makes sense to shop around and find out who is willing to offer not just approval but the best terms as well.

2. Seek out Financing from a Dealership

As part of a dealership, Langley Auto Loans may be uniquely positioned to help solve your credit needs. Unlike banks, dealerships have an added incentive to find a credit solution for applicants: They get to move a car off their lot.

With that added incentive, you may find dealerships are more willing to work out a financially viable solution for a wider range of borrowers. We urge caution, however, as there are unscrupulous lenders—at banks and dealerships—that offer short-term teaser rates or engage in other opaque lending practices.

No matter where you secure financing, take the time to understand all the implications of the paperwork you’re about to sign. If your credit history has a few bumps in the road, an unfavorable loan will lead only to more credit challenges in the future.

3. Hold off until Your Credit Improves

While dealerships often have creative solutions to gain approval for almost any lender, a few situations—like a very recent repossession—may make it difficult to secure a loan. As noted before, not all loan approvals are equal, and securing a loan on manageable terms is just as important as getting initial approval.

Credit-building opportunities like secure credit cards give borrowers a chance to build a steady payment history without putting financial institutions at risk. If you can afford to wait a few months or a year to build up some credit (and let some credit mistakes fall further into your past), you may save thousands of dollars over the course of your loan.

If you’re still not sure where you stand, Langley Auto Loans has car loan experts that are happy to discuss your situation and provide professional advice. Start by filling out our online credit application. We’ll take it from there.

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