Applying for an auto loan is no cakewalk. You need to process various documents relating to your financial background, submit your application and wait for approval. Often, the auto loan application gets rejected. However, do not lose hope. Once you have mapped out the reasons for an auto loan rejection, it is easy to find a way to convert the rejection into an approval.
Auto Loan Rejection – And What You Should Do About it
Here is a list of major reasons why a loan gets rejected in the first place. You can also find rejection remedies that can help you in re-applying and successfully obtaining auto loan approval.
1) Documentation Errors
A car loan application requires a lot of information, right from your driver’s license, income proof and evidence of address. If your information is missing, for example: any name or address has been misspelled or has been fraudulently submitted, your auto loan is likely to be rejected by the lender.
Remedy: The best way to avoid documentation errors is to triple-check your application for any human errors and provide only legible and authentic information. Before you re-apply for your auto loan, it would be wise to check your credit report for any factual errors. Online portals such as Equifax and Experian can help you with your credit report for free.
2) Bad or No Credit Score
The credit score is at the core of every lender's policy. Individuals who have subprime credit scores (below 670), may be denied an auto loan. A bad credit score may be an occurrence of a past event where you have made late payments or you missed out on them. A no credit situation occurs when you have not applied for credit in a long time. It is hard for lenders to approve your application if your credit score portrays you as a risky borrower.
Remedy: As a bad credit score takes time to build, so does a good credit score. Get a co-signer on board with a stellar credit history who can vouch for your car financing. Your chances of getting approved will improve with a large down payment and a short term auto loan. Also, if you are planning to apply for an auto loan, avoid a mortgage or big financial event in the near future.
3) Unstable Income Vs. Big Loan Amount
Lenders can check your creditworthiness through your income stability and employment history. Freelancers and part-time employees may have a hard time getting approved for an auto loan. If you have an unstable income source, avoid buying an expensive car. If you request an auto loan to purchase a high-end Mercedes car, the auto loan will most definitely get rejected.
Remedy: A debt-to-income ratio works like a magical tool against unstable income. If you possess a good debt-to-income ratio, i.e., your monthly income can easily pay off your current debt along with the auto loan payments, then you will have a higher chance of getting an approval. Use a co-signer to attain the lender's confidence and work on choosing a car that fits into your budget.
From Lender's Rejection to Auto Loan Approval: The Road Ahead
The majority of reasons for auto financing rejection are mentioned above. In order to successfully combat your rejection, take cautious measures to improve your credit score. Become debt-free early and understand more about auto financing before you set out to lock down your next auto loan deal.
Want to buy a car quickly? Get instant auto loan approval with bad credit. Trust ezAutoFinance.net for guaranteed auto loans at the click of a mouse. Apply now and get approved for car financing without a down payment.
|
