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How Long Does a Car Loan Approval Take?

How Long Does a Car Loan Approval Take?

Buying a new car is an exciting experience. After test driving your dream vehicles, you’ve finally settled on the perfect one. Now it’s time for the financing process, but how long will that take? Getting approved for auto financing can be frustratingly slow at times. You’re eager to drive your new ride home, but first you have to wait for the lender’s official decision.


Knowing realistic timelines for loan approval can help you set proper expectations. Nothing’s worse than sitting anxiously by the phone day after day wondering if your application went through. Being informed on the typical process will make financing your next car much smoother.


In this guide, we’ll break down the average timeframes and key factors that affect how long approval can take. You’ll learn how to speed up the process and maximize your chances for a quick loan decision. Let’s dive in so you can get behind the wheel ASAP!

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Types of Car Loan Lenders

When applying for a car loan, you have several options for where to get financing. The type of lender you choose can significantly impact how quickly you get approved.

 

Banks and Credit Unions

Traditional banks and credit unions typically take 1-7 business days to approve a car loan. They require you to submit extensive documentation on your financial history, income, employment, assets, and debts. This allows them to thoroughly assess your credit risk, but also lengthens the approval timeline. Banks and credit unions may request pay stubs, tax returns, bank statements, references, and more. However, they often offer lower interest rates to borrowers with good credit.

 

Online Lenders

Online lending companies use technology to speed up the approval process. Many can approve your car loan application in just a few hours. Rather than relying on manual document review, online lenders use algorithms and data sources to analyze your creditworthiness. This automation allows near-instant decisions. However, online lenders may charge higher interest rates and approve applicants with poor credit more readily.

 

Car Dealerships

Getting financing directly through the dealership allows you to get same-day loan approval in most cases. Dealerships partner with lenders and financing companies to offer instant credit decisions right in the showroom. This on-the-spot approval means you can drive your new car home right away. However, dealership financing also tends to come with higher interest rates than banks or credit unions.

 

Factors Affecting the Approval Timeline

When applying for a car loan, there are several key factors that will determine how quickly you can get approved:

 

Your Credit Score and History

Lenders will carefully review your credit report and score when assessing your application. In general, the higher your credit score, the faster the approval. If you have excellent credit (720+ score), you may get same-day approval from some lenders. However, borrowers with lower scores can expect more scrutiny and longer wait times.

Your overall credit history is also important. Having a long history of managing credit responsibly will speed up the process. Limited credit history or past issues like late payments may require more review.

 

Income and Employment Documents

Proof of stable income from employment or other sources is required for approval. Lenders want to verify you can afford the monthly car payments. Provide recent pay stubs, tax returns, bank statements or other income documentation to substantiate your application.

Self-employed applicants may need to supply additional tax records, which can extend timelines. Have all your financial paperwork ready before applying.

 

Down Payment Amount

The size of your down payment, if any, impacts approval timelines. Larger down payments reduce the amount financed, demonstrating you can cover more of the vehicle cost.

A 20% or higher down payment makes for a very strong application that can speed up the process. Smaller down payments take more underwriting to approve.

 

Getting Pre-Approved in Advance

Getting pre-approved for financing from a lender before shopping can shave days or weeks off approval timelines. You submit documents and get qualified in advance, making for a smoother and quicker final approval.

 

Getting Approved Quickly

If you want to speed up the loan approval process, there are several steps you can take to get approved as quickly as possible:

 

Check Your Credit Reports and Scores

Before applying for an auto loan, check your credit reports from Equifax and TransUnion to understand your current credit standing. Look for any errors that need disputing and get a sense of what your credit scores are. Most lenders will use your scores to set interest rates, so knowing them ahead of time helps set expectations.

 

Gather Necessary Paperwork

To avoid delays, have income statements, tax documents, and any other required paperwork ready when you apply. This proves details like employment and income to help the application move faster. Double check what each lender needs to include with the application.

 

Get Pre-Qualified Quotes

Many lenders allow pre-qualification with a soft credit check. This gives quotes so you can compare options without a hard inquiry. It also shows the lender you are serious and speeds the final approval.

 

Provide Accurate Info on the Application

Giving correct details from the start avoids back and forth to verify info. Be thorough and double check things like income, debts, assets, employment, etc. before submitting the application to get approved as quickly as possible.

 

Maximizing Chances of Approval

If you have less-than-perfect credit or a low income, getting approved for an auto loan may seem daunting. However, there are several steps you can take to maximize your chances of getting approved quickly:

 

Pay down existing debts – Lenders want to see that you manage debts responsibly. Pay down credit cards and other loans as much as possible before applying. This will lower your debt-to-income ratio.

 

Avoid new credit inquiries – Each application for new credit results in a hard inquiry on your credit file. This can negatively impact your score, so avoid applying for new credit before your auto loan.

 

Explain any credit issues – If you have late payments, defaults, or other issues, proactively explain them to the lender. Providing context helps assure them you will repay the auto loan.

 

Verify income with documents – Lenders need proof you can afford the monthly payments. Provide pay stubs, tax returns, bank statements showing regular deposits, or other income verification.

Taking these steps before applying will demonstrate you are financially responsible. This can shorten the approval timeline and increase your chances of getting approved quickly.

 

Pros of Instant Approval

One major advantage of instant approval from dealerships is being able to drive your new vehicle home the same day. Rather than waiting days or even weeks for a traditional lender to process your application, instant approval means same-day gratification. You can complete all the financing paperwork and purchase agreements on the spot and leave with the car right away.

Instant approval also lets you skip long wait times between applying, getting approved, and finalizing the loan. Waiting can be frustrating when you’re eager to get into your new ride. With instant approval, the entire financing process is wrapped up in a single visit to the dealership. This accelerated timeline gets you behind the wheel fast.

 

Cons of Instant Approval

While getting same-day approval and driving your new car home right away sounds appealing, instant approvals also come with some potential downsides to consider:

 

Higher Interest Rates

Lenders that offer instant approvals typically charge higher interest rates, sometimes significantly higher. This is because they take on more risk by approving applicants quickly without thoroughly reviewing credit and income documentation first. The extra interest costs can really add up over the course of your loan, so make sure to calculate total costs, not just the monthly payment.

 

Limited Negotiation

With instant approval, you lose negotiation leverage on things like the car price, trade-in value, add-ons, and financing terms. Dealers know you need fast credit approval, so they may be less willing to negotiate. Pre-approvals give you more flexibility to shop around and negotiate the best overall deal.

While fast financing is convenient, really consider if higher rates and costs are worth sacrificing for same-day approval. Taking a bit more time upfront could save you a lot more money in interest charges down the road.

 

How Banks Work

Banks have more stringent requirements and a longer underwriting process compared to other lenders. Here’s what to expect when applying for a car loan from a bank:

 

Requirements

To qualify for a bank auto loan, you’ll typically need:

 

  • A minimum credit score of 660 or higher
  • Stable income and employment – at least 1 year at your job
  • A down payment, often 10-20% of the vehicle price
  • Proof of income such as recent pay stubs
  • A low debt-to-income ratio (DTI) below 50%

 

Underwriting Process

Banks thoroughly review your credit report, income, debts, assets, and other financial information. This underwriting process involves:

 

  • Verifying your identity and employment
  • Checking your credit history and score
  • Calculating your debt-to-income ratio
  • Reviewing your income sources and assets
  • Evaluating your down payment amount
  • Estimating the value of the vehicle

 

Timeline

It takes 1-7 business days on average to get approval from a bank. The underwriting process is comprehensive, so same-day approvals are very rare. Banks will notify you by phone, email, or letter once a decision is made.

 

Credit Unions

Credit unions have emerged as a popular option for getting a car loan. As member-owned financial cooperatives, credit unions aim to serve their members’ interests. This often translates into lower interest rates and more flexible loan approval compared to large banks.

Some key perks of getting a car loan from a credit union include:

 

  • Lower interest rates than banks or dealerships
  • Preapproval options to secure financing ahead of time
  • Personalized service and one-on-one support
  • Loan terms tailored to your budget and needs
  • Quicker loan processing and decision-making

 

The loan application and approval process at credit unions is streamlined compared to banks. You can often complete the application online or in-person at a branch. Approvals can come in as quickly as the same day for preapprovals or 1-3 business days on standard applications.

Gathering the needed documents like proof of income and ID upfront will help speed up the process. Credit unions also pull credit reports and evaluate your creditworthiness quickly through automated underwriting systems. This enables them to issue approval decisions faster than banks which rely on manual underwriting.

Overall, credit unions offer a great option for fast car loan approvals while still providing competitive rates. Turnaround times are often 24-72 hours so you won’t have to wait long like with some banks. Credit unions should be strongly considered by anyone seeking the best combination of quick approval and affordable financing.

 

Online Lenders

Online lenders have revolutionized the process of getting approved for a car loan. With everything handled through their website or app, it’s incredibly convenient and fast.

Online lenders like Capital One, Lightstream, and Upstart use technology to make near-instant decisions on your application. Rather than waiting days or weeks, you can get approved in just a few hours after submitting your information. They use algorithms to analyze your credit, income, and existing debts within minutes.

Because online lenders don’t have physical branches, they have lower overhead costs. This allows them to offer approval to those who may not qualify with traditional banks, like applicants with fair credit or 1099 income. Online lenders mainly look at credit scores and debt-to-income ratio. If those numbers check out, you have a good chance of approval.

The convenience of online lenders makes them popular options for financing vehicles. You don’t need to book an appointment at a branch or dealership and can apply anytime, anywhere from your phone or computer.

 

Dealerships

Getting approved for financing through a dealership can often be the fastest route to driving your new car home the same day. Dealerships have relationships with partner lenders and financing companies to provide quick credit decisions.

Many dealerships offer in-house financing, where the dealership itself provides the loan directly to the customer. This allows them to make instant credit decisions without waiting for an outside lender. The downside is that in-house financing tends to have higher interest rates compared to banks or credit unions.

The convenience of same-day approvals and financing from dealerships makes them appealing for car buyers who need a vehicle quickly. While interest rates are often higher, some shoppers prioritize speed and drive off with a new car right away after getting dealer financing approved.

 

The Impact of Preapproval on Approval Time

Getting preapproved for a car loan can significantly shorten the final approval timeline. Preapproval provides the lender with your financial information upfront so they can assess if you qualify. This pre-qualifies you before you’ve selected a specific vehicle.

The preapproval process verifies income, debts, credit score and history. Once preapproved, the lender has essentially agreed to lend you up to a certain amount for your car purchase. You’ve passed the major hurdles of the full approval process.

Later when you apply for financing on an actual vehicle, the lender already has most of what they need. They simply have to confirm a few final details like the car’s value. This streamlines the full approval dramatically compared to applying from scratch.

Preapproval also locks in an interest rate with many lenders. This protects you from rates going up before you find your new car. Having a rate hold gives you bargaining power to shop around for the best deal knowing the financing is secured.

Getting prequalified or preapproved can shorten the wait for final loan approval from days or weeks down to just hours in some cases. It eliminates most of the documentation gathering and review by the lender upfront.

 

Compare Lenders

When applying for a car loan, it’s important to compare multiple lenders to find the best rates and terms. Here are some key factors to consider when comparing lenders:

 

Interest Rates

Interest rates can vary significantly between banks, credit unions, online lenders and dealerships. Banks and credit unions tend to offer the lowest rates for borrowers with good to excellent credit. Online lenders provide low rates too but may charge higher rates for bad credit. Dealerships typically don’t offer the best rates.

Get rate quotes from multiple lenders before applying to compare. APR differences of even 1-2% can mean thousands in interest savings over the loan term.

 

Fees

Some lenders charge origination fees or prepayment penalties. Ask about all fees upfront so they are transparent. Application fees also vary – some lenders charge $50-100+ to simply apply.

Choose lenders that have minimal fees. Credit unions and community banks tend to have the lowest fees.

 

Customer Service

Review lender reviews to gauge their customer service reputation. For example, some large banks receive poor reviews for long hold times or lack of support.

Opt for lenders known for responsive service and strong ratings. This ensures help is there if any issues arise.

By comparing interest rates, fees, and service, you can find the best car loan lender for your needs and budget.

 

Waiting Period Tips

The waiting period between applying for a car loan and receiving approval can feel long and frustrating. However, there are a few tips to make the process smoother.

Firstly, be patient. Approvals often take at least a few days, even with online lenders. Avoid constantly calling your lender for status updates, as this can slow down the process. Instead, wait the estimated timeline before following up.

When you do follow up, be polite and simply ask if any additional documents or actions are needed from you. Provide any requested info quickly to speed up your application.

Lastly, explore all your loan options, such as banks, credit unions, and dealerships. Getting quotes from multiple lenders can help you find the best loan for your situation. This also gives you a backup plan if one lender takes longer than expected.

While waiting is difficult, using this time to optimize your application sets you up for quick loan finalization once approved. With patience and preparation, you can get the car loan you need.

 

Approval Expectations

When applying for a car loan, it’s important to set realistic expectations for how long the approval process can take. This will prevent frustration and allow you to plan properly.

As a general guideline, here are the typical approval timeframes to expect with different lender types in Canada:

 

  • Banks – Allow 5-7 business days for approval. Large banks often have more thorough approval processes.
  • Credit unions – Can take 1-3 business days usually. Credit unions may have shorter approval times.
  • Online lenders – Many provide approval in just a few hours due to automated systems. But can take 1-2 days occasionally.
  • Dealerships – Same-day approval is common but rates may be higher. Depends on the lender they partner with.

 

Getting pre-approved in advance, having a strong credit score, and submitting all required documents can help shorten these timeframes. But it’s wise not to expect instant approval, even from online lenders in some cases.

If your application requires further verification or discussion, the process may take longer as well. Be patient and follow up if you haven’t heard back within the typical approval timeframe for that lender.

 

Conclusion

Getting approved for auto financing can feel like a drawn-out waiting game. But knowing what to expect from different lenders can help set realistic timelines. Banks and credit unions provide the most affordable rates but can take up to a week for approval. Online lenders use algorithms to provide near-instant decisions, while dealers arrange same-day approvals at higher rates.

The best way to get a car loan fast is to have a strong credit score, steady income, and get pre-qualified in advance. Compare options from a mix of lenders rather than jumping at the first instant approval. With reasonable expectations, you can find affordable financing within 24-72 hours in most cases. A few extra days of patience can save thousands over the loan term.

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Questions About Car Loan Approval Duration

The time it takes to get approved for a car loan in Canada can vary depending on the lender. Generally, you can expect to hear back on your application within 1-3 business days.

 

Banks and credit unions typically take 1-2 business days to make a decision. Online lenders and finance companies may be able to approve your loan within minutes or hours using automated systems. Dealership financing can also provide same-day approvals in some cases.

 

If additional verification is needed, such as providing proof of income or identity, it may take 3-5 business days for a final decision. Having all your documents ready beforehand can help speed up the process.

The main factors that determine how long it takes to get approved for a car loan in Canada include:

 

– Your credit score and history

– Income and employment details

– Down payment amount

– Loan amount requested

– Type of lender

 

Borrowers with good credit scores, steady jobs, large down payments and reasonable loan amounts generally get the quickest approvals. Those with damaged credit, unverified income or high debt levels may need to provide more documentation which extends the process.

 

You can get a car loan approved faster in Canada by:

 

– Having a co-signer with good credit

– Providing recent pay stubs upfront

– Putting down a larger down payment

– Only applying for what you can reasonably afford

– Getting pre-approved before visiting dealers

– Having all your documents ready to submit

– Comparing rates from multiple lenders

 

Meeting the lender’s approval criteria and having your financial information verified ahead of time will help accelerate the loan decision.

 

Most lenders in Canada require a minimum credit score between 600-650 for car loan approval. Scores above 700 will get you better interest rates.

 

Here are the typical credit score requirements:

 

– Prime loans (best rates) – 720+

– Standard loans – 650-719

– Subprime loans – 600-649

 

Even with bad credit, specialized subprime lenders may approve loans with scores around 500. But you’ll pay significantly higher interest rates.

 

At most major Canadian banks, expect to wait 1-3 business days for a decision on your car loan application.

 

Banks have stricter approval criteria compared to other lenders, so they need to verify your income sources, debts, credit standing and down payment savings. This due diligence extends the approval timeline.

 

That said, if you’re an existing bank customer with accounts in good standing, they may be able to assess your profile faster and provide conditional approval within 1 business day in some cases.

 

Credit unions in Canada can usually approve a car loan within 1-2 business days after receiving a complete application.

 

As member-owned co-operatives, credit unions may have more flexibility than banks when assessing loan applications. They focus on your full financial profile instead of just credit scores and ratios.

 

Joining your local credit union ahead of time and having a pre-existing relationship can help speed up the loan decision process as well.

When financing a car through the dealership in Canada, you can often get an approval decision within hours or even minutes.

 

Dealers have relationships with many lenders and can submit your application to their networks to find the best match. This allows them to pick a finance provider that will approve your loan fastest based on your qualifications.

 

Same-day approval is common through dealership financing. Just be aware that fast decisions sometimes mean higher interest rates.

While not very common, instant approval on a car loan – usually within seconds or minutes – is possible in Canada through some online lenders and dealers using automated systems.

 

To qualify for instant approval, you’ll generally need good-to-excellent credit (scores above 700), steady income that can be electronically verified, and meet other preset qualifying criteria that indicates you are very low risk.

 

If approved instantly, you’ll still need to provide documentation later to complete the financing.

 

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To check the status of your Canadian car loan application, first contact your loan officer or account manager at the bank, dealership or lender you applied with.

 

You can call, email or message them to ask for an update on your application and find out if any further information is needed for approval.

 

Many lenders also have online portals or apps where you can directly view application status updates in real-time. This lets you monitor your progress through stages like documentation review, underwriting, conditional approval and/or funding.

While zero-down car loans were once very common in Canada, regulations have made them much rarer today. However, they are still possible in certain situations:

 

– If you have excellent credit (720+ score)

– Through manufacturer subsidized programs

– By wrapping loan into vehicle lease

– Using a secured loan with different collateral

– Through “buy here pay here” dealer financing

 

Expect to pay higher interest rates, fees and strict repayment terms with no money down. You’ll also likely need to purchase additional Guaranteed Asset Protection (GAP) insurance.

When applying for car loan approval in Canada, have these documents ready for lenders:

 

– Proof of income – recent pay stub, T4, tax return

– Identity verification – driver’s license, passport

– Proof of address – utility bill, bank statement

– Cost estimate of vehicle you want to buy

– Down payment amount confirmation

– Other loan statements showing existing debts

 

Having your documents organized ahead of time will help accelerate the lending decision so you can get an approval faster.

 

Canadian lenders determine your maximum approved car loan amount based on:

 

– Your gross monthly income

– Existing monthly debt obligations

– Credit history and scores

– Down payment amount

– Vehicle purchase price

– Loan term length

 

As a rule of thumb, your total monthly car expenses – loan payment plus insurance, gas, maintenance – should not exceed 35% of your gross monthly pay. Your total debt ratios are also considered.

 

Higher incomes and credit scores allow bigger loan amounts.

Yes, it is possible to get approved for a car loan in Canada while receiving Employment Insurance (EI), disability assistance, pension or other income replacement benefits.

 

Lenders will want to verify and assess your benefit entitlements to determine an appropriate loan amount and repayment capacity. Provide them with your EI approval letter or Notice of Assessment.

 

Interest rates may be higher compared to those with traditional T4 employment income. You’ll also need a decent credit score.

Getting approved for a used car loan from a lender in Canada typically takes between 1-3 business days on average.

 

Used car loans may have a longer approval process because the lender needs to assess the value of the aged vehicle you want to finance to confirm appropriate loan-to-value ratios.

 

Those with good credit borrowing reasonable amounts compared to their income can expect a quicker used car loan approval.

 

Those with bad credit scores below 600 in Canada can get approved for a car loan through:

 

– Subprime lenders like CarMoney

– Specialty credit rebuilding programs

– New car manufacturer captive finance arms

– Buy here pay here dealerships

– Secured loans using collateral

 

Interest rates will be much higher with bad credit. Expect rates above 10% compared to 3-5% for prime borrowers.

The easiest car loans to qualify for in Canada are:

 

  1. Pre-owned vehicle loans – More affordable purchase prices lead to easier approvals.

 

  1. Longer term loans (7-8 years) – Lower monthly payments.

 

  1. Loans with flexible lenders – Online lenders, dealers, private sellers.

 

  1. Secured car loans – Lets you use collateral like property to secure financing.

 

Having a large down payment and co-signer also makes approval much easier if you have credit or income challenges.

 

Most car loan agreements in Canada do not allow you to trade in the financed vehicle until all payments have been made and the loan has been closed. This protects the lender’s security interest.

 

For early trade-ins, you’ll need to pay off the remaining loan balance first or roll it into a new, larger auto loan that covers both the old loan payout and additional financed amount for the new vehicle.

Yes, you can get a personal auto loan from a bank, credit union or online lender in Canada to buy a vehicle from a private seller, not just dealerships.

 

The lender will deposit the approved financing into your account to pay the private seller once all documentation is signed. You may need to provide copies of the bill of sale and ownership transfer paperwork for loan approval.

 

Private sale loans usually require a down payment and have higher interest rates since the vehicle can’t be repossessed.

Once your Canadian car loan is approved, here is what happens next:

 

  1. You review and sign the final loan agreement documentation.

 

  1. Any down payment or trade-in value gets applied by the dealership.

 

  1. The lender deposits the loan funds to the dealership, seller or your account.

 

  1. You take ownership and possession of the financed vehicle.

 

  1. You begin making the set monthly loan principal & interest repayment.

 

Be sure to review all policy paperwork so you clearly understand the loan terms.

 

Most lenders in Canada require at least 6 months of on-time payments on your existing auto loan before considering you for approval on another, secondary car loan.

 

Some specialty lenders offer secondary financing earlier for borrowers with great credit and income. But interest rates will likely be much higher, fees costlier, and terms stricter compared to a standard single loan.

 

A better option is to just wait until your current car loan is repaid in full unless you absolutely need another vehicle right away.

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