💰 Does Having an Active Loan Affect Car Loan Approval?
Yes! Having an active loan (whether personal, mortgage, or another type of debt) affects your car loan approval because lenders assess your debt-to-income ratio (DTI) and financial obligations.
Lenders look at:
✅ Your ability to afford additional repayments
✅ The type of loan and its impact on your finances
✅ Your credit history and score
If your DTI is high, some lenders may decline your application or approve a smaller loan amount.
🔍 How Lenders View Active Loans for Car Loans
Lenders check your existing financial commitments to ensure you can afford a new loan.
| Factor | Why It Affects Approval | How to Improve Chances |
|---|---|---|
| 💳 Active Credit Card Debt | High credit card balances increase financial strain. | Pay down credit cards or loans to lower DTI. |
| 🏦 Existing Loan Repayments | Ongoing repayments reduce available funds for car loan. | Refinance or pay off loans to reduce monthly obligations. |
| 📉 Debt-to-Income Ratio (DTI) | A high DTI suggests financial strain. | Lower DTI by reducing existing debt. |
| 🏠 Mortgage or Rent | High housing costs limit borrowing power. | Increase down payment or apply with a guarantor. |
| 🚗 Type of Loan | Some loans are viewed as higher-risk, such as payday loans. | Clear high-interest loans before applying. |
If you have multiple loans, lenders may approve your car loan with higher interest rates or stricter conditions.
✅ How to Get a Car Loan If You Have an Active Loan
If you have active loans, follow these steps to improve your chances of getting approved for a car loan:
1️⃣ Check Your Debt-to-Income Ratio (DTI) – Ensure your DTI is below 40% for better approval odds.
2️⃣ Pay Off Some Debts – Paying off existing loans can increase your borrowing power.
3️⃣ Consider Refinancing Existing Loans – Refinancing can lower monthly repayments and improve approval chances.
4️⃣ Provide Proof of Stable Income – Lenders prefer applicants with consistent, high income.
5️⃣ Use a Finance Broker – A broker can find lenders that approve applicants with multiple loans.
Even with multiple loans, some lenders may still approve your car loan if your finances are in order.
🚨 What If Your Car Loan Is Declined Due to Active Loans?
If lenders decline your application, consider:
✅ Applying for a smaller loan to reduce your financial commitment.
✅ Paying off existing debts or refinancing to lower your DTI.
✅ Using a guarantor to reduce lender risk.
A finance broker can help find lenders that approve borrowers with multiple financial commitments.
🚀 Why a Finance Broker Can Help If You Have an Active Loan
If your car loan application was rejected due to existing debt, a finance broker can help by:
✅ Finding lenders that approve borrowers with multiple loans.
✅ Matching you with a loan that suits your financial situation.
✅ Helping you avoid unnecessary credit checks that lower your score.
If you have active loans but need a car, don’t risk rejection! 🚗💨 A finance broker can help you secure finance with the right lender.
If you have an active loan but need a car loan, you still have options! A finance broker can match you with lenders who approve car loans despite existing debts.
DISCLAIMER
The information provided on this website is general in nature only and has been prepared without considering your financial needs, circumstances and objectives and should NOT be construed as financial, taxation or legal advice. For more information, get in touch with our experienced partner brokers today.
