If you’ve been through car loan refusal, it will likely be for one of five common reasons. They aren’t always obvious but once you look at an application from a lender’s perspective, you’ll usually see why.
Our Binbrook auto loans team outlines the five main reasons for car loan refudal. If you know why loans can be turned down, you can mitigate against them in your application!
Insufficient credit score for the amount
Asking to borrow too much money for the credit score you have is a very common reason for car loan refusal. Your credit score not only influences whether a lender will work with you or not but can also influence how much they’ll lend you.
You can avoid this by getting prequalified for the loan to see if you would quality ahead of the application. Our Binbrook auto loans team would also be able to tell you.
Lenders are now obligated to check that you can comfortably afford the auto loan you’re asking for. It’s also in their interest, as those who can easily afford the loan are less likely to default.
Affordability checks your monthly income and outgoings to make sure you can afford to make the repayments without getting into difficulty.
If the monthly payment uses up a significant portion of your free cash each month, you may fail affordability. Make sure the monthly payment leaves you enough to keep saving and live well.
Intermittent or unsettled employment
If you change jobs a lot or haven’t been able to settle into a role, this will be a red flag to a lender. They need to know you have sufficient, reliable income to service the loan and an unsettled employment history shows the opposite of that.
Try to stay in a job for as long as possible. If you’re a temp or gig worker, mention that in your loan application and be prepared to provide evidence of income for at least 3 months, including bank statements.
Seasonal workers and the self employed are assessed differently, so don’t worry about that.
Unfortunately, age still plays a part in lending decisions and isn’t always something you can fix.
Young people under 18 cannot get an auto loan or any type of credit. Those who are 18-21 can get credit but are unlikely to have a sufficient credit score or employment history unless they didn’t go to college.
Older borrowers over 65 may also have difficulty getting an auto loan. There are specialist lenders who work with older borrowers but as a rule, 65 is a cut off point for auto loans.
The answer for both is to use a co-signer who can guarantee the loan.
Errors on the auto loan application
The final, and most easily avoided reason for car loan refusal is an error on the application. It could be as simple as getting your address wrong, a decimal point in the wrong place on your salary or outgoings or something else.
If you’re applying using a phone or while you’re at work or doing other things, mistakes are easy and very common.
The answer to this and to all these other reasons is to work with professionals. Work with Dixie Auto Loans and we’ll make sure you stand the highest chance of success. It’s what we do!
For those of you who know that you have a challenging credit situation, please visit Dixie Auto Loans where we have a team of credit specialists ready to help you get approved for a car loan today!
For any questions or concerns, please don’t hesitate to contact us here!