There are many reasons your Capital One auto loan might get denied after the approval. For example, you might have been pre-approved for the loan but then get denied once the bank got a closer look at your financial situation. Moreover, it can be get denied for too many credit inquiries, yo-yo financing, multiple auto loan applications, etc.
- If you have a moderate credit score then you can get a Capital One auto loan to buy a new vehicle or used vehicle, or refinance an existing loan
- One Key disadvantage of Capital One auto loan is, that you have to buy the car from participating dealers of Capital One bank
- Capital One Auto Finance has flexible terms that range from 24 to 84 months
- The two main reasons why your Capital One auto finance was approved and then denied are multiple auto lenders and Yo-Yo financing
What is Capital One Auto Finance?
Capital One auto finance provides auto loans for capital one customers. If you have a moderate credit score then you can get this auto loan to buy a new vehicle, used vehicle, or refinance an existing loan. Capital one allows you to apply for this auto loan individually or jointly. If you have an excellent credit score then you can apply for this loan individually. But if your credit score is poor then it will be the best option for you to apply for the loan jointly. The best part of this loan is you can use it for both new and used vehicles. The downside of this loan is, that you have to buy the car from participating dealers of Capital One bank. There is a tool named Auto Navigator and it will help you get yourself pre-qualified for a new or used car loan from Capital One bank. It will only take a few minutes to complete the pre-loan assessment.
Capital One Auto Finance Details
|Loan Amount Range||Starting at $4,000|
|APR||As low as 3.99 percent|
|Loan Term Length||36 to 72 months|
|Hard Credit Check||No|
|Refinance Min Credit Score||540|
|Purchase Min Credit Score||500|
|Min Purchase Loan||$4,000|
How does Capital One Auto Finance Work?
The loan application and handling process of Capital One Auto Finance are similar to any other auto loan. Before applying for this auto loan you should know that this car loan only works with certain dealerships. Though Capital One bank has a partnership with a wide array of dealers but you won’t have any option to opt for another financing for private party purchases. So, if you apply for this auto loan then it will limit your options to buy from independent dealerships. Capital One Auto Finance has flexible terms that range from 24 to 84 months. Another key advantage of this loan is its interest rate. The interest rate of Capital One Auto Finance is lower compared to other auto loans. This loan allows you to buy used vehicles but the vehicles must be the model year 2011 or newer with less than 120,000 miles.
Reasons Why Capital One Auto Finance Approved then Denied
If you got approval for Capital One Auto finance and then got denied then one of two situations likely happened:
- Multiple Auto Lenders
- Yo-Yo Financing
1. Multiple Auto Lenders
This is a common thing that can happen to you when you apply for an auto loan. For example, let’s say you have submitted your loan application to three different lenders. Now one lender might accept your loan and send you the confirmation message while the other two lenders might deny your application. The denied two lenders might still require to let you know that you were denied. So, if you receive a mail saying your auto loan is denied then closely look at the name of the lending institution. If the name of the lender in the denial letter is different than the lender you went with then you might have received a denial letter from a different lender and there is nothing to worry about it.
2. Yo-Yo Financing
Yo-Yo financing is also known as “spot delivery” and it is a process where you take delivery of a car before you get approved for the auto loan. In this type of situation, a customer usually signs the loan papers and drives the car home. After a few days, the car dealer call the car owner and tell them that the loan was not approved. So, the card dealer has to take the car back to the dealership. Some car dealership owners check the credit history of the customer as well as financial information, vehicle information, etc. and think that the lender will approve the loan application of the customer and ask the customer to complete the paper works at the financing rate and terms that he believes the loan will be approved for. But sometimes it doesn’t happen and the customer becomes a victim of Yo-Yo financing. So, in order to avoid this type of situation, you must not take a vehicle home until you get approved for the auto loan.
What to Do When an Auto Loan is Denied?
If your auto loan is denied then it doesn’t mean that you won’t get approved for another auto loan. So, you should take some steps before applying for another auto loan. Let’s check them out!
1. Contact the Lender
If your auto loan gets denied then the first thing you should do is contact the lender. You must contact the lender and find out the reasons why your loan application is rejected. If the problem is a simple application error then you can just make adjustments and reapply. You should keep in mind that if there is any problem with your loan application then you have 60 days to correct the information from the rejection date.
2. Increase Credit Score
The credit score is one of the most important elements of your auto loan application. If your credit score doesn’t meet the minimum requirements then your loan application will be rejected. Therefore. You should improve your credit score before applying for another auto loan or your application will be rejected again
3. Pick a Poor Credit Lender
If you have a poor credit score and it is the main reason for your application denial then you should look for a poor credit lender. Usually, this type of lender lends money to people who have a poor credit score to qualify for a loan. However, before opting for a loan from a poor credit lender you should keep in mind that this type of lender tends to carry much higher interest rates!
4. Minimize your Debt
If you have lots of debt then you should consider minimizing the debt amount before applying for another auto loan. Sometimes, your auto loan application can be rejected if you have high debt to income ratio. Therefore, you should review your current financial condition and try to remove any unnecessary expenses to minimize your debt.
FAQs about Capital One Auto Finance Approved then Denied – What are the Reasons
Can a car loan be denied after approval?
Yes, a car loan can be denied after pre-approval. Though it is very rare but it can happen for several reasons. There are many reasons your car loan can be denied after the approval and some important reasons are errors on the loan application, Yo-Yo Financing, too many loan applications, etc.
What happens if financing falls through on a car?
If financing falls through on a car then the dealer will take away the card. If you don’t voluntarily surrender the car, then the dealer has the power to repossess the vehicle. If you make a down payment for the car then the dealer will return the full amount.
Can a lender cancel a car loan?
Yes, by law the lender has the authority to cancel a car loan. Though it is very unlikely for a lender to cancel the loan but if it happens then it can be very disruptive. One key reason for a lender to cancel the auto loan is failed payments.
Is Capital One’s preapproval guaranteed?
No, the Capital One pre-approval for an auto loan is not guaranteed. The pre-approval of a Capital One auto loan does not guarantee that your loan application will be approved for any particular financing terms.
How do you know if you’re approved for a car loan?
When you apply or submit a loan application, the lender is legally required to send you a letter of Denial or Adverse Action Notice. It will help you understand that your loan application is denied. On the other hand, if your loan application is approved then you will also get a letter or statement regarding your loan approval.
Last Updated on November 16, 2022 by Magalie D.
Magalie D. is a Diploma holder in Public Administration & Management from McGill University of Canada. She shares management tips here in MGTBlog when she has nothing to do and gets some free time after working in a multinational company at Toronto.