Getting your car loan approved depends on such factors your lender’s willingness and your financial standing. Having your car loan rejected could be as a result of applying for an amount that you cannot afford or a low credit score.
Before submitting your application, find out whether the following reasons will affect your eligibility to qualify for a car loan.
1. Credit score
Your credit score provides your potential lender with insights on your credit history. A poor credit score is the most common reason why lenders reject car loans.
This is because most lenders consider an applicant with a credit score of 600 and lower to be a bad risk. Poor credit scores are caused by too many debts or not paying your debts on time.
2. Unclear, incorrect, or missing information
As with any other type of loan, you are required to submit several documents and personal information when applying for car loans. These include identity and income-related documents.
You will also need to fill up the loan application forms correctly. In the event of unclear, incorrect, or missing information, you might have to start the loan application process all over again.
3. Irregular or unstable income
Seasonal employees, freelancers, and any other person with an irregular income will have a hard time convincing a lender that they will repay the loan in time.
If you are self-employed and you cannot provide all the required income information, consider using a cosigner when applying for your car loan.
People who are newly employed are also considered high-risk borrowers. In that case, consider applying for a car loan after six months.
Whichever the reason for your loan rejection, there’s something you can do about it. For instance, take your time to improve your credit score by paying off some or all of your debts on time. This applies if your loan was rejected due to a low credit score or a high debt to income ratio.
