Car loan: Ready, set, approved, rejected

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Dear Driving for Dollars,
I bought a new car about a month ago. The finance guy at the dealership got car loan rate quotes from several lenders. He presented them to us and we selected one. In today’s mail, I received a rejection letter from another bank stating it could not approve my loan.

I am confused because, while this bank provided a quote, I didn’t request a car loan from it. Why am I getting this letter? Is there any reason to be concerned?
— Joey

Dear Joey,
When a dealer obtains car loan rate quotes on behalf of one of his customers, in many cases the dealer is actually completing a loan application for that customer with multiple lenders. The lenders provide a quick quote to the dealers for the purposes of them writing up the sale, but the actual car loan still needs to go through the proper channels with the lender to be approved.

Usually the lender’s initial approval or disapproval of the car loan and the associated car loan interest rate being offered are spot-on, but occasionally the lender comes back later with a different interest rate or denying the auto loan altogether, as in your case. In many states, there are laws that require a lender to send a written notice of any loan applications that are denied with a reason for the denial, so that’s why you received this in the mail. It’s possible you may receive others.

As far as being concerned, there is no reason to be concerned as long as you are confident you were approved for an auto loan from the lender you chose at the interest rate and terms you selected at the dealership. If you’ve received paperwork directly from the lender outlining the terms of your loan and they are what you expected, you should be all set. If the only paperwork you have for the car loan is what you initially received at the dealership, call the dealership and ask to speak to the finance and insurance department to confirm that you were approved for the car loan you chose when you bought the vehicle.

Note that it is commonly thought that if there are multiple inquiries on your credit report, it will harm your credit score. This is not entirely true. If you are requesting an auto loan, other lenders you have requested a car loan from in the prior 30 days will not affect your credit score. If you have applied for another type of loan or if you apply for one a short time after initiating your car loan, the inquiries for the car loan will be used to calculate your score, and you could see an impact.

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