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If your application for car finance was denied, it’s an opportunity to go through your financial history and see where it can be strengthened. However, rejected loan applications can count as a black mark on your credit history, so it’s a good idea to try to make sure you have the best chance of success before you begin.
This means understanding why lenders reject applications, and knowing what you should do if it happens to you.
If your loan is rejected, the first thing to do is to make sure you have completed the application correctly and that it wasn’t turned down on a technicality. Double-check that you:
If your loan application was completed correctly and still turned down, it was probably because the lender found red flags in one or more of the criteria outlined below. Lenders look at these criteria to determine whether you’re a high-risk (more likely to default) or a low-risk (more likely to pay it back on time) applicant. Lenders generally prefer to do business with low-risk applicants, so this is the group you want to be in.
Your credit history is a strong indication of how likely you are to pay back or default on a loan. It includes details of events such as past bankruptcies, outstanding debts and overdue accounts, and previous credit enquiries. A higher credit score means lower risk for lenders.
One of the main factors lenders consider is your current income and state of employment. If you’re not earning enough to pay back the loan, only just started a new job, or have a less than stable income or employment situation, then you’re more likely to be classed as a high-risk applicant.
If you are currently paying back other loans, or have other forms of debt, including credit card debt, then you’re a higher risk applicant.
If you’re having trouble getting a car loan because you’re a high-risk applicant, there are two options that are immediately available.
The key to avoiding expensive car loan application rejections is to make sure you’ve met the lender’s requirements before you apply. Ideally you will be confident of your success with every application. If you are declined, ask the lender the reason. They can inform you of any weak points in your application that you might have missed, and you can take the appropriate steps to resolve these for next time.
Also, if there are any inflexible eligibility requirements, such as a minimum income, or documentation that needs to be submitted, it’s important that you are aware of these, and that you have everything that is necessary before applying.
If your car loan application is rejected, there are three simple steps to take before your next application.
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Pepper Money is an Aussie non-bank lender that offers a vast range of personal loans and home loans to customers Australia-wide. Find out more here.
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