Can I Get Another Car Loan If I Already Have One?
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So, Can You Have Two Car Loans at Once?
You Have Two or More Breadwinners in the Home
You Sell or Trade Vehicles for a Living
You Own More Than One Home
You Have a Small Business That Requires Two or More Vehicles
Your Teenager Needs a Set of Wheels to Get Around
Getting Approved for a Second Auto Loan While You Already Have a Car Loan
Don’t Take Out Two Auto Loans on One Vehicle
Know the Qualifications for a Second Loan Approval
Your credit history. Personal credit remains the primary barometer for auto lenders deciding whether or not to approve a second car loan. You’ll need to show you’re making on-time payments, you’re not overusing credit (i.e., keeping your debt-to-income ratio for a car loan low), and you have a robust FICO® Score. Any score over 660 can put you in prime position for a second auto loan. Your annual income. Since you already have an active auto loan that hasn’t been repaid, lenders will focus particularly on your income. Specifically, the lender usually wants to see if your income can easily cover a second auto loan. Since auto purchases also lead to additional expenses, like maintenance, repair, gasoline, insurance, and state registration fees, your annual income should be able to handle not only the car loan, but the expenses that go with auto ownership. Debt-to-income ratio (DTI). Overall household debt compared with income, meaning the debts you’ve accumulated vs. your personal financial assets, is a big deal to auto lenders reviewing a second auto loan application. Ideally, your DTI ratio would be about 35% debt to 65% assets. More debt could lead to an auto loan rejection. The second vehicle’s value. Auto lenders will also study your second car’s estimated value. In general, the less expensive the vehicle is, the better your chances of getting a second auto loan approved. It’s simple math weighed against risk. The less cash you borrow, the better your odds of repaying the loan. Your down payment. Additionally, it’s helpful to bring a hefty down payment on a car. Anything more than 20% of the vehicle’s estimated value is likely to help your cause with a lender.
Consider Getting a Cosigner
Taking on a Personal Loan vs Traditional Auto Loan
Interest rates. Personal loan interest rates are typically higher than traditional car loan rates, with the rate ceiling on a personal loan at approximately 36% and the ceiling on a regular car loan at about 25%. Loan terms. Loan repayment timelines are about the same with both personal loans and traditional auto loans. Personal loans usually need to be paid back within two to seven years while a regular car loan repayment period stands at between three to seven years. Lenders of exotic car financing, however, may offer 144-month auto loans. Down payments. Down payments are not required for a personal loan but they may be required with traditional car loans. Loan fees. Personal loan origination fees can be as high as 10% in some instances, whereas loan fees for regular car loans usually range between 1% and 2% of the loan amount. The finance charges on a car loan may consist of interest and fees. Collateral. Personal loans for autos typically require no collateral. That’s not the case with traditional auto loans, where the vehicle itself is usually the collateral. There are multiple types of car loans, including secured auto loans and unsecured auto loans.
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