You already have a car, but you may be in a position where you need a second car, whether it’s for yourself, your spouse, or your children. If this is the case, you may be contemplating your options. Depending on your finances, you could be asking yourself, Can I get a second car loan? The answer is a resounding yes! But there are things to keep in mind.
At Camino Federal Credit Union, we have been serving the Montebello community since 1941 with financial products tailored to each member’s situation and sincere, attentive guidance. Learn everything you need to know about getting a second auto loan.
Can I Get A Second Auto Loan?
Yes, you can get a second car loan. No legal restrictions stand in the way of having two auto loans at the same time, but it may be more difficult to qualify for a second loan.
Lenders will only approve you if your income and debt can handle the added monthly expense. If your credit score is poor or your debt-to-income is above 43%, you will face challenges getting loan approval.
Just as importantly, if you do not have a good credit score, you will likely face higher rates and get approved for a smaller loan amount, which presents limitations on the car you can afford. You need good to excellent credit to receive a low APR.
If you are approved for a second auto loan, do not forget to add your new vehicle to an existing car insurance policy and purchase comprehensive and collision coverages. Ensure you have a stable income that will cover the monthly payment on both loans.
Should I Try to Get Two Auto Loans At the Same Time?
Determining whether or not you should get a second auto loan is as important as answering the question, Can I get a second car loan? It depends on your financial situation.
If you already have excellent credit, limited debt, and a strong income, a second car loan may not have as big of an impact. Still, life happens, and your situation can change quickly. This decision impacts your finances significantly if not carried through properly.
As a result, it’s good to be thoughtful when making a decision. Consider the type of car you can afford and the long-term impact of the monthly payments associated with it, and ask yourself: Do you need a second car, or do you want it?
If you need a second car, a second auto loan could be a great choice.
What to Prepare for When Taking out a Second Car Loan
Preparation is key for those asking, Can I get a second car loan? During the application process, there are several roadblocks you might face.
Scrutiny from Lenders
Whenever you apply for a loan, anticipate scrutiny from lenders. Especially when getting a second car loan. Lenders will assess your creditworthiness, current debt load, payment history, and income to determine if you are a good candidate for financing.
Most lenders will request detailed information about the car you are planning to purchase to determine if the sales price is reasonable or exceeds the car’s value. Since you are adding more debt, the lender needs to be sure you can make punctual monthly payments.
If your credit score is low or you have a substantial debt load compared to your income, lenders might deny financing.
Increased Insurance & Maintenance Costs
Anticipate that your auto insurance premiums will increase when you add a second car to your policy. The process for adding a car is fairly simple and shouldn’t be too time-consuming. When working with your insurance provider, you will need your:
- Vehicle identification number (VIN)
- The year, make, and model of the vehicle
- The license plate number
Depending on your provider, you may receive a discount when insuring two or more vehicles on the same policy. This discount is also called a multi-car discount. To qualify, you have to register and park both cars at the same address.
Also, do not overlook maintenance costs. Two cars mean double the maintenance costs, which can be a significant added expense as well.
Difficulty Getting Credit After Financing
When you apply for debt products such as loans, creditors and lenders will evaluate your creditworthiness.
A higher credit score means you pose a lower risk for them, and you can receive approval for a credit card or loan product with favorable terms. A lower score, however, could result in a higher interest rate or outright denial.
Still, when you take out a second car loan, your credit score will possibly take a temporary hit, making it harder to qualify for more credit in the short term. This hit is due to your credit utilization ratio, which accounts for 30% of your credit score.
When you secure financing for a second car, it impacts your credit utilization record, but it could recover after a few months of punctual payments to the lender because payment history is the biggest component of your credit score.
Lower Approval Odds
Because lenders perceive a second car loan as risky, the odds for approval are generally lower. Lenders might assume you will struggle to make payments, which costs more money to them if you default. Still, you can take several steps to improve your chances of approval.
How Can I Improve My Chances of Getting a Second Car Loan?
You can take several steps to put the odds in your favor if you are asking, Can I get a second car loan? You need good or great credit, typically 670 or higher, to qualify for low, competitive interest rates, and you will need a sufficient amount of stable income.
To improve your chances of gaining approval for a second auto loan, we advise:
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- Disputing credit report errors. Credit report errors can have a significant impact on approval and the terms you receive. Before applying for financing, dispute these errors by visiting AnnualCreditReport.com for a copy of your credit report from the three major credit bureaus (Experian, TransUnion, and Equifax) and filing disputes with the appropriate agency as soon as possible.
- Paying down revolving debt. You will preferably have a stable source of income that significantly outstrips your monthly debt payments. Paying down revolving debt could result in more favorable terms by improving your debt-to-income ratio and, consequently, your credit score.
- Saving for a sizable down payment. The larger the down payment, the less you will need to borrow. Lenders will often likely be apprehensive if they see you have taken out a second auto loan, but a smaller amount will seem less risky as it will result in a more manageable monthly payment.
Using a co-signer. A co-signer is someone who is responsible for payments if you default on them. Reaching out to someone and requesting that they assume this responsibility can help reduce the risk you pose to lenders.
Do You Need Help Financing Your Car? Let Us Know!
The answer is clear if you were asking yourself, Can I get a second car loan? A second auto loan is certainly an option, but whether or not it is a good idea depends on your financial situation. Let Camino help you determine if this makes sense for you. We want our members to find the best option that works for their needs to build a bright financial future.
We offer competitive auto loan rates and honest, attentive guidance throughout the entire process. Please give us a call at 800-835-3400 to speak with one of our Member Advisors, or visit our Contact Us page for more information.