Guide to Finalized Car Loans
Share this article:
Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
When Are Car Loans Finalized?
How Long Does It Take to Finalize a Car Loan?
Car Loan Underwriting Process
Submit the application: The first thing that needs to happen is for an application to be submitted. You can complete it online or in person, and it usually takes 10 or 15 minutes to complete if you have all of the required documents. Pre Approval response: Some lenders respond immediately with a preapproved deal for an auto loan, while others need a few days to get back to you. Aim to get qualified with multiple lenders to compare rates and to do it within a 14-day period. Although pre-approval requires a hard pull of credit, having multiple lenders request your credit in a short time frame will only count as one pull. Full approval: The approval process varies in length of time. Many lenders will approve the loan on the same day, depending on what time of day it is when you applied. Some lenders may require a few days to process. Loan funding: Once you’ve received full approval from a lender, you will typically get your funds within one to three business days, though it’s a good idea to check with your lender.
Halting the Application Process
Not submitting all required documents: Every loan application is unique. You’ll likely need two valid forms of identification, proof of income documentation, and your social security number. Check with your lender to see their exact requirements. Applying late in the day: Some lenders offer same-day approval, but processing could be delayed if you apply outside of business hours or on a weekend. Not meeting vehicle requirements: Lenders often have specific requirements for both used and new cars to be considered eligible for financing. They need to know things like mileage, model, and year to be able to consider you for a loan.
Can a Finalized Car Loan Get Denied?
FICO® Score: The most common reason finalized car loans get denied is because of credit score. The lender may have added “with approved credit” to an offer, which means that they’ve reconsidered the offer due to something they found in an applicant’s credit report. History of bankruptcy: Generally, people get denied due to bankruptcy that occurred less than two years before filing for the auto loan. There are two major exceptions to getting approved for a car loan after bankruptcy, including the Chapter 7 and Chapter 13 bankruptcy exemptions. Payment to income ratio: A payment-to-income ratio is the monthly car payment divided by the monthly income of an applicant. Payment to income is an important factor for lenders, but they could make an exception if other areas of the application are deemed favorable. Debt to income ratio: A debt-to-income ratio is the amount of monthly bills on the buyer’s credit bureau divided by gross monthly income before tax. If an applicant can’t pay his monthly bills in addition to the proposed car loan, underwriters aren’t going to approve the loan.
3 Auto Loan Refi Tips
Refinancing your auto loan could lead to lower monthly car payments and more money in your budget. Lantern by SoFi can help you find the right auto refi loan for you. Shortening the term of your auto loan may increase your monthly payments, but you’ll likely pay less in interest over the life of the loan. You may have trouble refinancing the loan on a car that is worth less than what you owe. For more info, check out When Is the Right Time to Refinance a Car?
Frequently Asked Questions
About the Author
Share this article: