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Can You Get a Car Loan if You Already Have an Open Car Loan?

Yes, you can have multiple car loans active at the same time if you meet the basic credit requirements of the lender to which you apply. Those requirements include gross income, debt-to-income ratio (DTI), credit score, and down payment amount.

Not Just Income:  Debt-to-Income

Most lenders want to see that you have at least $1,450 a month in gross income. Next, a lender wants to see that you have less than forty percent of that income committed to debt repayment. That is your DTI. Most lenders include your rent, insurance, and all recurring payments as part of your DTI when they are considering a loan.

Automotive-Specific Credit Score

Third your credit score is pulled. Every one has an auto specific credit score. FICO refers to it as an auto-enhanced credit score. This score looks specifically at your past use of auto loans and is usually higher than your other credit scores unless you have a history of late payments or repossessions. This score is not available for you to purchase or see.

Down Payment Considerations

After looking at the first three areas, a lender will look at the amount of your down payment. Based on the other categories, you may be required to offer a higher down payment. Even if you are able to offer a small amount down, you should try to offer a down payment of twenty percent to keep your monthly payments down and avoid paying any more total interest than necessary.

Basically, the lender is going to determine whether you are in a solid financial position to take on a second car loan, and they are going to set your interest rate based on how likely you are to make all of your payments on time.  If you the necessary income, a healthy DTI, a good history of credit, and a down payment, you should not have a problem having multiple car loans. You can improve your chances of being approved for an additional car loan by paying down your current debt load and managing your monthly expenses.

About the Author

The author has many years of experience in automotive finance and insurance. However, each consumer's situation is unique. It is best to contact a finance specialist for further assistance.
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