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When can a lender refuse a car loan?

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Dear Driving for Dollars,
I bought a car in one state where I was employed at the time. My car loan was approved, all the paperwork was signed and the car was registered in my name. A couple of weeks later, I moved to another state. Now the dealership is calling me telling me the bank refused my car loan because they could not verify my employment. They want full payment or the car back. Is this legit? Can the bank do that?
— Raelene

Dear Raelene,
It is quite possible this is legitimate. When you get a car loan, sometimes a dealership will allow you to take delivery of the car even though your loan has not been fully approved. Start by reading through all the papers you signed to see if there’s anything in them that says the deal has any contingencies — “contingent upon financing approval,” for example.

Sometimes dealerships use a form called a rescission agreement to outline a broader array of contingencies. It sounds like the lender didn’t approve your car loan because you moved and were no longer employed at the same location as you were at the time you applied for the loan.

You may be able to get them to approve a new car loan by providing information about your new job, or the dealer may be able to rework your loan with another lender by giving it this information. If you can’t get a new loan and you signed something that showed contingencies to your agreement, you’ll probably need to return the car. That’s likely to cost you at least your initial monthly payment. Or, you could pay the dealer in full.

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If you have a car question, e-mail it to us at Driving for Dollars. Read more Driving for Dollars columns and Bankrate auto stories.

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