If you’ve been looking for a car loan and been denied more often than not, it may leave you wondering why. There are many explanations why lenders decide against lending to you. Here are some of the most common reasons and what you can do to improve your chances when you apply for loans in the future.
Bad credit history
Lenders immediately look at your credit history to figure out if you’re at risk of not paying them back. The higher the risk, the more reluctant lenders are to approve your application. Credit histories will record all debts and their current status. It will include previous loan applications, current loans, defaults if there are any and current or previous employers. Applying for loans more often appears risky to lenders. You should also check your credit history as it sometimes contains errors. It’s up to you to find them and fix them. If you do have overdue or outstanding loans or part ix deb agreement, you should look to pay them down as soon as possible.
Financiers will generally only lend money to people with stable, regular jobs. People who change jobs often or are self-employed are seen as a high risk. If you are in a probationary period, lenders will still feel nervous about lending to you. It may be worth your while to wait until you are clear of the probationary period until applying for a loan again. If you’re self-employed, you will have to prove your income with tax returns or banking slips. See our tips on how to get approved for your car loan in 2015.
Moving around too much
Some lenders will deny an application based on how many times you’ve moved house. If you move around more than the average borrower, lenders may feel skeptical about approving your loan and count you as a higher risk.
What you can do
One way to get the car loan you’re after is to apply for a secured loan. A secured loan uses the car as collateral and usually comes with a lower interest rate.
Another sure fire method is waiting a while to pay down debts or build savings. It’s even better if you can do both. This way your credit history will improve and your potential risk in the eyes of lenders decreases. Not only that, if you save more you won’t need to take out as large a loan as before.
If you want to know more, it’s a good idea to talk to a financial professional about your car finance options.