5 Possible Reasons Your Car Loan Was Denied & What to Do Next

5 Possible Reasons Your Car Loan Was Denied & What to Do Next

Posted on August 2, 2022

Nobody likes rejection but it’s part of life. You can either let it break you or come back stronger. If you’re erring towards the latter, we can help. We asked our Mount Hope auto loans team for the 5 most common reasons for car loan rejection and what to do about it. This is what they came up with.

1.   Asking for too much

Auto loans are based on how much you can afford and your credit score. If you ask for too much and won’t be able to make repayments, your application will be refused. If you ask for too much relative to your credit score, you will be refused.

To overcome this, look carefully at what you can afford, use an auto loan calculator, get prequalified for the auto loan and do your own math.

If your credit score isn’t high enough for the amount you want to borrow, consider borrowing less or waiting until you have improved your score.

If the monthly payment is well within your limits, you should get the loan.

2.   Payment history

Your payment history is the part of your credit report that shows all your debt payments over a set period of time. It’s one of the first places a lender will check when assessing an auto loan application.

One reason to refuse a loan is missed payments.

Miss one payment and nothing bad will happen. Life is busy and as long as you paid up, it’s all good.

Miss more than one payment or regularly miss payments and it’s a different matter. This looks like a pattern and isn’t something many lenders will want to risk exposing themselves to.

Always pay on time. Use automatic payments to ensure you never miss one and you’re all good.

3.   Employment history

Lenders like stability. Someone with a stable job, steady income and nothing to upset the many months of loan payments they’ll want from you.

If you have an unsettled employment history, only stay in a job for a few months or a year, that’s a red flag.

It’s different if you’re a seasonal worker or self employed as that’s expected. You’ll have other hoops to jump through if you’re not employed.

To overcome this, try to find a job you can settle into over the longer term. The longer you can stay with the same employer, the better your application will look.

4.   Errors on the application

Errors on auto loan applications happen all the time. It could be as simple as getting your house number wrong or adding a decimal point in the wrong place in your salary or outgoings.

To avoid car loan rejection due to this this, scrutinize your application very carefully or work with one of our Mount Hope auto loans team and we’ll help you with it.

5.   Your age

Unfortunately, age still plays a part in whether you’re accepted for an auto loan or not.

Apply too young, 18 or 19 and you won’t have much of a credit history to use to make a decision.

Apply to old and lenders will worry that you won’t be earning or be around to complete the loan. Harsh but true I’m afraid.

In both cases, consider using a co-signer on the loan. They guarantee the loan and assures lenders they will take up payments if you get into difficulty. It can work whether you’re young or old.

When you’re ready for a car lease or loan, get in touch with the Mount Hope auto loan experts at Northway Ford for great deals on auto finance.