Can You Change Which Bank You Use on a Car Loan If the Paperwork Has Not Gone Through?

As long as your paperwork hasn't been processed by your lender, you can switch auto loan providers. If you haven't signed contracts or received the loan amount, you shouldn't have a problem. If you have an approval from a dealership, it can easily switch your lender. A loan approval does not require you to borrow from the lender who approved you.

Dealeship Financing

If you're using a dealership for financing and haven't picked up your vehicle yet, you can change loan providers. Dealers handle loan contracts for lenders they use and don't lend directly. Your loan isn't in place until you pick up the vehicle; only then can the dealer submit your signed lending contracts to the loan provider. If you took possession of a vehicle and signed loan contracts, you might not be able to change loan providers unless you make the request the same day. Ask your dealer directly if you can change loan providers if you've already signed contracts.

Direct Lender Financing

If you're preapproved for a loan through a lender or submitted your information, you don't have to complete the process. Unless you sign your contracts and take the money, you can choose a different provider. Call the lender who approved you, and let it know you don't want to proceed with the loan process. If you found a loan with better loan options, such as a lower interest rate or more affordable down payment, use the opportunity to allow the lender to beat the other lender's offer.

Binding Paperwork

Once you signed all of your loan paperwork, paid the seller and took the vehicle, you are legally bound to your loan contract. In this case, your paperwork is in the processing stage. You might not have made your first payment yet, but your account is likely already reported to the credit bureaus. You can't change your loan provider at this point and doing so will cause you to default on your loan contract. You'll have to pursue a refinance instead.

Refinance

Refinancing a vehicle requires you to apply to a different lender for the car's loan balance. The new lender will pay off the old lender to become the new lien holder. Before you decide on refinancing, determine if your current lender charges a early payoff penalty fee. Most lenders don't, but the charge can be costly. You might have to offer a down payment when refinancing if your original purchase was a new car. Once you take ownership of a new vehicle, it becomes used and its lending value changes.