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Getting approved for a car loan is only one step of the financing process. Although it can seem redundant, lenders check your application and credit multiple times. After you get preapproved or prequalified, you’ll need the lender to finalize the car loan. Fortunately, it’s possible to get a loan deal in your hand on the same day you apply. You’ll not only need to come prepared, but you’ll want to know what a good rate looks like and whether you’ll actually get the rates as they’re advertised.Getting started on an auto loan is definitely a big commitment. Before you rush to get behind the wheel, check out this guide to figuring out when a car loan is finalized.
When Are Car Loans Finalized?
Car loans are finalized once the car loan process has been completed. When your initial application is sent to a lender, you begin the process of qualifying for an auto loan. If you settle on an offer they preapprove you for, then you still have to wait for them to close the deal. ‘Finalized’ means the lender has reviewed your documents, re-pulled your credit, and made sure nothing changed in your credit history (such as applying for a credit card) since the preapproval was initially gained. During this process, the lender can keep the initial deal on the table, change the conditions of the loan, or deny the loan.The loan is only official once it’s been finalized. After taking the loan, consider the process of refinancing a car loan to lower your APR. You can wait 60 to 90 days from the original loan to allow the vehicle title to transfer properly or even longer to build your credit score for a chance at better rates. Recommended: Credit Scores: What’s Involved in Calculating and Building Your Credit
How Long Does It Take to Finalize a Car Loan?
Typically, the longest it takes to finalize a car loan is a few days. In some cases, it can happen in just a few seconds. Nevertheless, exactly how long it takes to finance a car varies among lenders.In general, dealerships tend to finalize car loans quicker than online lenders, while banks and credit unions are known to take the longest. Purchasing a car through a private seller as opposed to a dealership may also extend the time it takes to finalize the loan.Keep in mind that a faster process isn’t always better for your wallet. For example, dealerships are known to charge higher auto loan interest rates than banks and credit unions, and those with better credit scores tend to get better interest rates. In the third quarter of 2024, auto loan statistics showed that borrowers with superprime credit scores had an average APR of 5.08% on a new car and those with deep subprime credit scores had an average interest rate of 15.33% on a new car. With that said, there’s more to know about the function of car loans before you accept a finalized deal.
Car Loan Underwriting Process
Some lenders will conduct an underwriting process in order to approve it for finance. The time frame it takes auto loan underwriters to review and approve a car loan depends on who you choose to apply with, the amount you need, and your creditworthiness. To help you understand how long this process could take, let’s run through the approval 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 to 15 minutes to complete if you have all of the required documents.
Preapproval 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 do it within a 14-day period to minimize the impact on your credit. Although preapproval 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
If you want to speed up the application process, make sure you avoid these bottlenecks.
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?
There are certain reasons why a car loan that was previously approved could get denied. Car loans most often get denied when lenders take a second look at you and your credit. Here are some factors that generally influence their decision:
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.
If your car loan got denied, you might benefit from looking for a loan from a different bank, credit union, online lender, or dealership. On the bright side, it could be an opportunity to spend more time shopping around to find competitive rates online. If you aren’t having much luck getting approved by yourself, your bank may allow you to add a cosigner or accept a loan at a higher interest rate. Another alternative is to build your credit using safer and cheaper methods like secured credit cards.
The Takeaway
So when is a car loan finalized? It’s important to know that the preapproval offer you get from a lender isn’t final until they say so. It typically doesn’t take long for lenders to finalize car loans. Just be aware that lenders can change their minds, meaning the conditions of the final offer might look different than what was proposed during preapproval.Once your car loan is finalized, you can always refinance your auto loan if you’re not satisfied with the rates or terms. If you’re wanting to refinance, Lantern by SoFi can help. With just one application, you’ll receive offers from top lenders in our network, all with no obligation to you.
Frequently Asked Questions
How long does it take to finalize a car loan?
What is the process to finalize a car loan?
What are the reasons that a car loan is not finalized?
Photo credit: iStock/Brenda Sangi Arruda
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About the Author
Jason Steele
Jason Steele has been writing about credit cards and award travel since 2008. One of the nation's leading experts in this field, he has contributed to dozens of personal finance and travel outlets and has been widely quoted in the mainstream media.
