Not Getting Approved for an Auto Loan

[DocMur]

Graduating MS4 here, and wondering if anyone else ran into the same trouble and what they did about it. I am not getting approved for a car loan (a 3 year $10,000 loan)! The 2 banks I applied to cited my high ratio of debt to income, because *duh* I am graduating med school with a ton of debt and starting residency which makes very little (relatively speaking). I even re-applied with my parents as a c0-signer and was still denied for the same reason. I went to the local bank branch and despite how nice they were and a number of phone calls, they were not able to have the decision reversed. I am looking into credit unions, but at least so far have not had success there yet. It seems like I am going to be left with two options: (a) finance through the dealership no matter what the rate and then hope to refinance later, which I have my doubts because my debt isn't going anywhere during residency, or (b) take a loan from my parents after they take the money out of their retirement account, which sounds awful.

There has to be people in my same situation, there just has to be. What did you do to get around this? Am I doing something wrong on my applications? Thank you for any help you may offer.

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[amine2086]

Graduating MS4 here, and wondering if anyone else ran into the same trouble and what they did about it. I am not getting approved for a car loan (a 3 year $10,000 loan)! The 2 banks I applied to cited my high ratio of debt to income, because *duh* I am graduating med school with a ton of debt and starting residency which makes very little (relatively speaking). I even re-applied with my parents as a c0-signer and was still denied for the same reason. I went to the local bank branch and despite how nice they were and a number of phone calls, they were not able to have the decision reversed. I am looking into credit unions, but at least so far have not had success there yet. It seems like I am going to be left with two options: (a) finance through the dealership no matter what the rate and then hope to refinance later, which I have my doubts because my debt isn't going anywhere during residency, or (b) take a loan from my parents after they take the money out of their retirement account, which sounds awful.

There has to be people in my same situation, there just has to be. What did you do to get around this? Am I doing something wrong on my applications? Thank you for any help you may offer.

This is a difficult situation. I would advice against tapping into your parents retirement account because they would likely have to pay a hefty penalty just for withdrawing the money early. Not to mention the delay in retirement. What if your parents got the loan (not just cosign), bought the car for you and you just pay them back on monthly basis. I am assuming they have better credit than you do.

 

[AlternateSome1]

You could also try to buy a cheaper used car.

 

[shiftingmirage]

Could your parents take out the loan in their name? Not taking from retirement, a regular loan and you make the payments? Or they buy the car, you use it, and make the payments?

 

[colbgw02]

This strikes me as pretty stupid and ridiculous. Even a personal loan, without demonstrable collateral, should be available to you for the amount you've cited. I understand that the front desk peons are incapable of independent thought, but it seems like if you just got the right manager on the phone then you could get this taken care of.

Failing that...do you have to have this vehicle prior to residency? If you can wait until July, then your debt:income ratio may change sufficiently to convince the peons of your solvency.

 

[shopsteward]

Can you possibly make residency work without a car? Live within walking/bicycling/public transport distance of the hospital? If you can do this, the reduced commuting cost will help your residency finances enormously, even apart from the loan issue.

If you absolutely have to have motor transport (not like or want but need), what about a scooter? If not a scooter, you need to buy the smallest cheapest used car ever. You are not in the $10,000 dollar car bracket yet, and won't be until you have made a solid start on paying back your student loans.

 

[BlondeDocteur]

Car loans are a much riskier market (frequent default) than, say, home loans. The underwriting standards are different & tighter-- which is why dealer financing offers those sky-high interest rates.

In every avenue of life, future income doesn't count as much as current income, so if you can skate by until July you might have better luck if you re-apply then. Also, you might target banks which have physician home mortgage loan programs-- they're entirely separate programs of course, but they're somewhat used to viewing resident physicians as extremely good risks.

Lastly, while you're still a student you might be able to take one of those $10,000 "residency relocation & expenses loans," which are at around 7-7.5% interest. Loads better than the 17-20% interest you see on some car loans.

 

[RangerBob]

Lastly, while you're still a student you might be able to take one of those $10,000 "residency relocation & expenses loans," which are at around 7-7.5% interest. Loads better than the 17-20% interest you see on some car loans.

I was also going to suggest this if you absolutely have to have a car and have to have it now. Generally though, the rates are around 7-7.5% if variable, around 9-9.5% if fixed. With rates that high, if you go this route I'd try to buy a cheaper, but reliable, car.

 

[colbgw02]

dear god, where are you people that you're getting 17-20% interest rates on cars? my wife and i bought two cars the summer we graduated from medical school, and i think the highest rate was around 6%, and that was before the 2008 economic meltdown that sent interest rates way down. since that time, we've had occasion to buy 5 other cars (ugh, don't ask), and i think the highest rate we've had on those was 1.9%.

 

[MordFustang]

I was also going to suggest this if you absolutely have to have a car and have to have it now. Generally though, the rates are around 7-7.5% if variable, around 9-9.5% if fixed. With rates that high, if you go this route I'd try to buy a cheaper, but reliable, car.

I just took one out from Sallie Mae a few months ago and I'm at 3.5% variable rate. You don't have to pay anything back throughout residency and you can take up to 20k out. Just going to echo what people above are saying in that you shouldn't do this unless you absolutely need the car. Here's the link:

https://www.salliemae.com/student-loans/medical-residency-loan/

 

[RangerBob]

I just took one out from Sallie Mae a few months ago and I'm at 3.5% variable rate. You don't have to pay anything back throughout residency and you can take up to 20k out. Just going to echo what people above are saying in that you shouldn't do this unless you absolutely need the car. Here's the link:

https://www.salliemae.com/student-loans/medical-residency-loan/

Wow--those rates are so much better than the rates offered from Wells Fargo--I wish I knew that a little over a year ago. I've paid most of the loan off now, but my credit is ver strong so I could've saved at least a few hundred in interest

 

[sam1999]

Car loans are a much riskier market (frequent default) than, say, home loans. The underwriting standards are different & tighter-- which is why dealer financing offers those sky-high interest rates.

In every avenue of life, future income doesn't count as much as current income, so if you can skate by until July you might have better luck if you re-apply then. Also, you might target banks which have physician home mortgage loan programs-- they're entirely separate programs of course, but they're somewhat used to viewing resident physicians as extremely good risks.

Lastly, while you're still a student you might be able to take one of those $10,000 "residency relocation & expenses loans," which are at around 7-7.5% interest. Loads better than the 17-20% interest you see on some car loans.

It is Not ture at all. Most home loans are granteed by US govt. so in general interest rates on them are lower than car loans Not due to risk factors. Most people default on their homes first than car becasue

1. It takes banks months or even years to foreclose on the property if you play your cards right. like bank did robo signing etc or not proper disclosure and you will will live rent free in your own home.
2. Cars are very easy to possess. You stop making payment, and within month or two bank will tow the car. These built in GPS really come in handy. Imagine you went for shopping and car is gone by the time you are back.
3. You can sleep in your car and with car you can seek employment any where in the city.

 

[sam1999]

How poor are you?

Try this,

Take a line of credit on your bank account.

If this is not approved than your parents can try same thing or take a home equity line of credit.

Once you take out cash buy a used car via craigslist. You can buy a decent car within $5000 to $10000.

I don't know who told you than car dealer loans are expensive. Most car dealer financing come from car makers and these days (at least 2 years ago) best deals are on new cars.

You are not credit worthy for a loan and too poor to pay cash then why bothering to buy a new cars. Most cars these days last much longer. You are easily buy 5/6 years old Toyota Camry in between $5-10K.

One trade trick. These day every one want fuel efficiency, 5 years old Corolla and Camry cost about same in used market. Mostly Camry is considered car for old people (I think average age for camry owner is like 40+ years) so you will get a better deal on a 5 years old Camry than 5 years old Accord even though brand new both cost about the same.

 

[Venko]

Graduating MS4 here, and wondering if anyone else ran into the same trouble and what they did about it. I am not getting approved for a car loan (a 3 year $10,000 loan)! The 2 banks I applied to cited my high ratio of debt to income, because *duh* I am graduating med school with a ton of debt and starting residency which makes very little (relatively speaking). I even re-applied with my parents as a c0-signer and was still denied for the same reason. I went to the local bank branch and despite how nice they were and a number of phone calls, they were not able to have the decision reversed. I am looking into credit unions, but at least so far have not had success there yet. It seems like I am going to be left with two options: (a) finance through the dealership no matter what the rate and then hope to refinance later, which I have my doubts because my debt isn't going anywhere during residency, or (b) take a loan from my parents after they take the money out of their retirement account, which sounds awful.

There has to be people in my same situation, there just has to be. What did you do to get around this? Am I doing something wrong on my applications? Thank you for any help you may offer.

Hang in there, and think about what you are spending money on extra carefully.

Have you thought about a lease? Sharing a vehicle with a friend? Bicycle / moped / scooter/ motorcycle? Public transport?

I echo the concept of waiting until July and then getting this reevaluated. Consider getting a temporary job between now and then to supplement your income...could be anything that pays.

Good luck. If you handle things carefully and thoughtfully you can fix your financial health rather quickly.

 

[sam1999]

One thing I forgot to tell .STOP applying and applying again and again. I think if you are more than certain number of credit application (e.g. 2) in a certain time period (lets say 30 - 60 days) it will further lower your credit score.

 

[BlondeDocteur]

It is Not ture at all. Most home loans are granteed by US govt. so in general interest rates on them are lower than car loans Not due to risk factors. Most people default on their homes first than car becasue

1. It takes banks months or even years to foreclose on the property if you play your cards right. like bank did robo signing etc or not proper disclosure and you will will live rent free in your own home.
2. Cars are very easy to possess. You stop making payment, and within month or two bank will tow the car. These built in GPS really come in handy. Imagine you went for shopping and car is gone by the time you are back.
3. You can sleep in your car and with car you can seek employment any where in the city.

If you really think houses are foreclosed upon more commonly than cars are repossessed, I'm not sure what to say. Car loans are higher risk, period.

 

[sam1999]

If you really think houses are foreclosed upon more commonly than cars are repossessed, I'm not sure what to say. Car loans are higher risk, period.

I don't want to get in debate for the sake of debate. Let me try again.

Home ownership in America is around 60% so NOT all car owners are home owner. Interest rates on home vs auto are different NOT primarily due to risk factor.

Banks/financier are more than willing to give money for car ownership is because it is very easy to possess and very easy to appraise. In many car possession cases repo man will come to your house in the middle of night, open your garage and will tow your car from your garage and police will not help you at all. If any doubts then read fine print of your loan agreement.

In most car loans there is no such thing early payment as is the case with home loans. You will pay agreed upon time period.

For equal risk profile bank will NOT lend you any money for home purchase but you can get loan for auto. Again many new car loans are financed by auto company themselves so they have every incentive to move inventory.

 

[colbgw02]

I don't want to get in debate for the sake of debate. Let me try again.

Home ownership in America is around 60% so NOT all car owners are home owner. Interest rates on home vs auto are different NOT primarily due to risk factor.

Banks/financier are more than willing to give money for car ownership is because it is very easy to possess and very easy to appraise. In many car possession cases repo man will come to your house in the middle of night, open your garage and will tow your car from your garage and police will not help you at all. If any doubts then read fine print of your loan agreement.

In most car loans there is no such thing early payment as is the case with home loans. You will pay agreed upon time period.

For equal risk profile bank will NOT lend you any money for home purchase but you can get loan for auto. Again many new car loans are financed by auto company themselves so they have every incentive to move inventory.

I don't know a lot about repossession, so I don't know if you're being hyperbolic for effect, but if someone opens my garage and takes my vehicle in the middle of the night without at least talking to me first, then I hope they have plenty of life insurance, because there's a decent chance they're not making it home that night.

 

[keifernny2]

I had a beater car when I started residency, but in my second month (after I had paystubs to show), I managed to get a "recent graduate" car loan (actually a lease) with a finance rate that I otherwise would've never qualified for (originally the dealers were telling me numbers like 12%. In the end I got the top tier rate through toyota and did fine. I'm not sure if they're still doing this process, but it doesn't hurt to try for the "recent graduate" program.

 

[Silent Cool]

https://www.capitalone.com/

 

[elektroshok]

Graduating MS4 here, and wondering if anyone else ran into the same trouble and what they did about it. I am not getting approved for a car loan (a 3 year $10,000 loan)! The 2 banks I applied to cited my high ratio of debt to income, because *duh* I am graduating med school with a ton of debt and starting residency which makes very little (relatively speaking). I even re-applied with my parents as a c0-signer and was still denied for the same reason. I went to the local bank branch and despite how nice they were and a number of phone calls, they were not able to have the decision reversed. I am looking into credit unions, but at least so far have not had success there yet. It seems like I am going to be left with two options: (a) finance through the dealership no matter what the rate and then hope to refinance later, which I have my doubts because my debt isn't going anywhere during residency, or (b) take a loan from my parents after they take the money out of their retirement account, which sounds awful.

There has to be people in my same situation, there just has to be. What did you do to get around this? Am I doing something wrong on my applications? Thank you for any help you may offer.

Do you have crappy credit? Whats your FICO score?