When you want to buy your dream car, one of the options you consider is applying for a car loan. This is an excellent alternative when you don’t have enough cash to make the purchase. The good thing is that it is now easier to buy your dream car than before and the odds of getting your car loan disapproved are minimal. However, it does not mean that it is impossible to happen. That is the reason why it is crucial for you to be aware of the common reasons why your car loan could be rejected.
Car Loan Rejection
1. Incorrect information or missing information
When you are applying for a car loan, the information you are providing to your lender are extremely important. You need to fill out the form carefully and thoroughly. If you must, you need to scan the whole form before you finally submit it. Read it twice or thrice. It is essential to ensure that all of your details are accurate because these information will be used by the lender to determine whether you are capable of paying the loan back or not. In short, all these information are going to be a significant factor for deciding whether your loan is going to be approved or rejected.
2. No stable source of income
When the lender does the investigation process and determines the approval of your car loan, one of their priorities is look at your ability to pay the loan on time. And they do this by checking your employment or your source of income. They see to it that you have a stable job that will enable you to pay your monthly dues. But if you don’t have a regular employment or if you went through frequent job changes, it could hamper your chances of getting your loan approved. So what you can do is to make sure that when you apply for a car loan, you have already stayed in a job for several months. But if you have just started in a new job, you might want to wait for a couple of months more before you apply for a loan.
3. Poor credit history
Your credit history is another important factor that lenders are looking into when you apply for a loan. When you have a bad credit history, the lenders become hesitant to approve your loan because they think that you might have issues in paying back. However, it does not mean that you can never get your loan application approved just because you have a poor credit history. There are still many ways for you to get that approval possible.
For example, you already have plans of buying a car through a loan, you should check your credit history as soon as you can so that you can dispute if there any inaccuracies and you still have time to improve your credit score. If you have outstanding debts and pending bills, also ensure that they are paid as soon as possible.
4. Your income does not match your loan amount
If for example you have a stable income and your credit standing also looks good, but then your loan amount is too much for the amount you are earning on a monthly basis, then there is still a chance for your loan to get disapproved. You should know that there is also a limit to the amount that you can loan based on your income. So if you are applying for an exorbitant loan amount because you want to be able to purchase a luxurious vehicle, you might want to hold your horses and reevaluate your budget. Consider how much you can afford to pay every month based on the price of the car you want to buy.
5. Practicing fraud
Another reason why a car loan application could get disapproved is due to fraudulent activities. There is a difference between accidentally submitting erroneous information and purposely giving false data. Engaging in fraudulent activities is something that you should never ever consider if you want to get a chance to get your loan approved, not only for an auto loan but for any other types of loan. Your name and your credit history could also become tarnished if you engage in these kinds of practices.