Reasons why your car finance can be refused
By Motor Match • 15/01/2024
Getting a car finance can be a complex and overwhelming process. With so many factors to consider, it's easy to overlook something crucial that could result in your application being refused.
Getting a car finance can be a complex and overwhelming process. With so many factors to consider, it's easy to overlook something crucial that could result in your application being refused. To help you better understand this process, this blog post will highlight the top reasons why your car finance can be refused and provide insights into how to avoid them.
Poor Credit History
Credit history plays an important role in determining whether you qualify for car finance or not. Lenders use your credit score to assess your risk as a borrower, and a bad credit score implies you are a high-risk borrower, leading to application refusal. Therefore, it's important to ensure you have a good credit history; if you already have bad credit, then it's essential to work to improve your credit score. You can improve your credit score by paying bills on time, lowering credit card balances, and fixing any errors in your credit report.
Inadequate Affordability
When considering car finance applications, lenders assess your ability to afford the payment of the loan. If your monthly income is very low, a significant portion will go towards loan payments, which can be considered a high-risk. Similarly, inadequate income or extensive debts will decrease your chances of securing a car loan. To avoid application refusal, make sure to keep your expenses in check, increase your income streams, and ensure to pay off any outstanding debts as soon as possible.
Unstable Employment Status
A lender’s prime goal is to ensure they get their money back, which is why they often prefer individuals with stable employment. Unfortunately, if you have an irregular/self-employed income, you may be regarded as high risk. To boost your chances of getting an auto loan, ensure to show steady employment in the two years preceding your application. Collect all the necessary documents, such as proof of income, and furnish them promptly to your lender.
Age Restrictions
Many auto loan providers have age restrictions that can limit your chances of getting finance. For example, some lenders may not offer loans to individuals under 22 or over 65. To avoid the rejection, know the age limit for the loan providers you are interested in, and apply only where you meet the age requirements.
Application Errors
Just like any other form of loan, ensuring the accuracy of the information you provide in your application is essential. It's important to double-check all the information you provide before submitting your application to avoid the risk of refusal. Common application errors that can lead to rejection include simple typos, incorrect personal information, and mismatching reported income and expenses.
Securing car finance can be daunting, but it doesn't have to be. By avoiding these common application mistakes, getting a car loan could be easier than you think. You can review your credit score, income, employment status, and eligibility before making a finance application. Remember, improving your credit score, keeping your expenses in check, stabilizing your employment status, and providing accurate information will ensure you do not face the rejection blues when applying for a car finance.
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