Is It Easy to Get a Car Loan if You Have an Open Car Loan?

Unless you have excellent credit and an acceptable gross annual income, you may not find it easy to get an additional car loan if you already have an open car loan. If you plan to trade your financed vehicle to a dealer for another purchase, however, obtaining a loan approval might be easier. Consider the information that auto lenders review to determine whether a second car loan is possible.

Debt-to-Income Ratio Consideration

To obtain a second car loan approval, you need sufficient and stable income. You must prove to your lender that you can pay for two car loans. To determine whether you can obtain another loan, your lender will require proof of income, such as a recent paystub that lists your year-to-date earnings. Your lender will also verify time with your employer by calling the business for which you work. If you are self-employed, your lender may require several years of tax returns. Based on the accounts listed on your credit report and on your credit application, your lender determines whether you can afford a second loan in addition to your other debts.

Credit History

You must also have good credit to obtain a second car loan. If your credit has suffered since you started your last loan, you may not easily obtain another loan. Having one loan does not guarantee you’ll obtain an approval for another. Potential auto loan providers review your current accounts and payment history. Your credit report states the number of accounts you have open, the number of payments you've made and if any payments have been late. Unpaid accounts, late payments, new lines of credit and the number of debts you have listed on your account may result in the decline of your loan application.

Application Requirements

Expect to complete a credit application to apply for your loan. A potential lender also considers the information you provide on your application in addition to your credit history. Your employment history may appear on your credit report if you've applied for a loan previously and listed this information. Otherwise, a lender prefers at least a two-year employment history. You'll provide a contact phone number for your employer so your lender can verify your employment. You must also list your rent or mortgage payment amount. Your housing payment is also used to determine your debt-to-income ratio.

Trading Your Vehicle

You may have to trade in your current vehicle to obtain another car loan or at least pay off your first loan to obtain another loan approval. If you trade in your vehicle toward another purchase, your dealership will satisfy your current loan amount. If you owe more than the vehicle's trade value, you can transfer the excess balance to your new car loan. If you are required to satisfy your current loan before taking out another loan, consider selling your car privately. You must pay the remaining balance due toward your loan if the vehicle’s sales price is not enough.