If you apply for a car loan and later decide you don’t want it, or you don’t like the terms, then you can decline the offer. However, once you’ve signed any paperwork, you're agreeing to the contract, and there’s no more “declining” the loan.
“No Thanks, Auto Lender!”
After you've taken your time and energy to apply for an auto loan, and you got the good news that you're approved, you’re not obligated to accept the offer.
Lenders go through an underwriting process where they use your income, work history, credit history, and more, to determine what terms you can qualify for and if you’re eligible for a car loan. Once this is complete, they send you either a denial or approval.
If you get the approval and decide this loan isn’t for you, you can walk away. As long as you haven’t signed the loan agreement, you can contact the lender and let them know you’re not accepting the offer.
They’re not likely to need a full explanation, either. You can simply tell them you changed your mind, or decided not to purchase the car, or that you’re looking for a better deal. Some lenders may offer to negotiate terms with you if you present other loan offers, which could work in your favor. Who knows – maybe you’ll end up accepting the offer after some good ol’ fashioned haggling?
Will Declining a Loan Offer Hurt My Credit?
No, declining an approved car loan offer does not hurt your credit score. If you decided to not go through with the loan, nothing further is reported to the credit bureaus.
However, whether you accept or deny the auto loan offer, applying for a loan of any kind can damage your credit score slightly – usually around five to 20 points per hard inquiry depending on your current credit score and history. Hard inquiries only impact your credit score for up to 12 months, though.
What If I Took the Car Home?
If you already accepted a loan offer and took delivery of a vehicle, you can't just contact the lender and back out. Once the contracts are signed, they’re legally binding.
Getting out of an auto loan after delivery isn’t like returning a pair of pants – you have to pay off the loan in some way to end the contract.
A few ways to get out of a car loan after delivery include:
- Refinancing – If you like the vehicle, but not the loan, then refinancing could be the answer. 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 you start a new loan with them, effectively ending your old contract.
- Sell the car – If you can sell the vehicle for what you owe to the lender, then this could be an easy solution to getting out of an auto loan you’re unhappy with. However, if your car has negative equity, this may be tough since the value of your vehicle is less than the amount of your loan.
- Trade-in – Trading in your vehicle for its full value doesn’t happen very often, since trade-in values are typically lower than a car’s retail value. However, you may find a dealer that’s willing to pay off your car loan and add any negative equity onto your next auto loan. This is called rolling over negative equity. But beware, this can lead to a high loan amount, more interest charges, and possibly getting stuck in another negative equity situation.
It’s not easy to get out of a car loan – especially if you just drove it off the lot. Before you sign the dotted line on any auto loan contract or purchase agreement, be sure to read everything carefully, ask any questions you may have, and keep your wits about you.
Looking for the Right Connections?
Deciding on where to get your next car loan can be stressful. It can be even more of a hassle for borrowers with less than perfect credit since many traditional lenders prefer high credit scores. But, here at Auto Credit Express, we want to make the search for a lender that works with lower credit easier through our nationwide network of dealerships.
Over the last 20 years, we’ve cultivated a network of dealers signed up with subprime lenders, all over the country. After you complete our free auto loan request form, we’ll get right to work looking for a special finance dealership that assists bad credit borrowers in your local area. Skip the search for a dealer and get started right away!