Can You Decline An Approved Car Loan?
Can you decline an approved car loan? Absolute. If you have taken the necessary steps to apply for a car loan and have been approved, you do not have to accept the offer.
Auto experts advise borrowers to seek pre-approval from multiple lenders to find the best deal and then use that as a backup to the dealer. You can also refuse any approval the dealer finds for you.
You can cancel for any reason until you have signed a loan agreement.
Reasons to decline a car loan
- The dealer exceeds your pre-approved bid. Congratulations. That’s why it’s smart to shop around.
- The conditions are not what you expected. A dealership typically has many sources of funding, and approval may require a longer term, higher APR, or larger down payment than you were prepared for. By pre-approving a loan before you buy, you have a backup plan to prevent this outcome.
- The contract contains extras that you do not want. If things like guaranteed asset protection, an extended warranty, or credit protection insurance are included in your loan, they can increase your monthly payment unnecessarily.
- Change of heart. If you change your mind about the vehicle or find a different car at a different dealer, you owe the dealer or lender nothing more than a courtesy call to say you’ve changed your mind.
What Happens If You Decline An Approved Car Loan?
As long as you haven’t signed a loan agreement or taken possession of the vehicle, you haven’t bought anything, so you can tell the lender and dealer, “Thank you, but no thanks,” and walk away.
If you plan to buy another car elsewhere, you may need to reapply for a loan if the previously approved car loan had specific terms for a specific vehicle. Your credit is protected if you apply for all loans within a short period.
If you signed a loan application and the vehicle was delivered without approval from a specific lender (“delivered on time” often occurs overnight and on weekends when instant approvals are not available), you may be asked to return to the dealer to sign new documents with terms that differ from what was originally discussed. You can return the car and also refuse this loan.
“No thanks, car loan!” – can you decline an approved car loan
After you have taken the time and energy to apply for a car loan and received the good news that you have been approved, you do not have to accept the offer.
Lenders go through an underwriting process that uses your income, employment history, credit history, and more to determine your eligibility and eligibility for a car loan. Once this is done they will send you a denial or approval.
If you are approved and decide that this loan is not for you, you can withdraw. As long as you have not signed the loan agreement, you can contact the lender and let them know that you do not accept the offer.
They probably don’t need a full explanation either. You can simply tell them that you have changed your mind, decided not to buy the car, or are looking for a better deal. Some lenders may offer to negotiate terms with you if you make other loan offers that can work in your favor. Who knows, maybe you’ll accept the offer after some old-fashioned haggling?
Will Rejecting a Loan Offer Hurt My Credit?
Can you decline an approved car loan? No, rejecting an approved car loan offer will not affect your credit score. If you decide not to go through with the loan, nothing further will be reported to the credit bureaus.
Whether you accept or decline the car loan offer, applying for a loan of any kind can hurt your credit score slightly, usually between five and 20 points per in-depth examination, depending on your history and current credit score. However, hard questions will only affect your credit score for up to 12 months.
What happens if I take the car home?
If you’ve already accepted a loan offer and received a vehicle, you can’t just contact the lender and walk away. Once contracts are signed, they are legally binding.
Taking out a car loan after delivery isn’t the same as returning a pair of pants – you have to pay off the loan somehow to end the contract.
Some ways to get out of a car loan after delivery are:
- Refinancing: If you like the vehicle but not the loan, refinancing can be the solution. Refinancing is replacing your old loan with a new one for the same car. The refinancing lender pays off your loan (if you qualify) and then starts a new loan with them, effectively terminating your old contract.
- Sell the car: If you can sell the vehicle for what you owe the lender, this can be an easy fix for getting out of a car loan you’re not happy with. However, if your car has negative equity, it can be difficult because the value of your vehicle is less than the amount of your loan.
- Trade-in: Trading in your vehicle for its full value is uncommon, as the trade-in value is often less than a car’s retail value. However, you can find a dealer who is willing to pay off your car loan and add any negative equity to your next car loan. This is called negative capital renewal. But be careful, this can lead to a high loan amount, more interest charges and possibly getting stuck in another negative wealth situation.
It’s not easy to get out of a car loan, especially if you got it from a parking lot. Before signing the dotted line on a car loan contract or purchase agreement, read everything carefully, ask any questions, and stay alert.