4315 North Service Road, Burlington, ON, L7L 4X7
My Garage

My car loan application was rejected, what now?

My car loan application was rejected, what now?

The title says it all really. This is a situation we see often when buyers apply for loans on the internet without proper preparation. It’s a tough situation to find yourself in but it isn’t irreversible.

So what can you do if your car loan application is rejected?

Car loan rejection reasons

Most lenders will provide a reason for the rejection of the car loan at the time. It will likely be either bad credit, sporadic or insufficient income or your debt ratio is too high. There may be occasions where a simple mistake on the application for could cause you to be rejected.

What you do next depends on the reason given.

Bad credit

Bad credit is definitely something we can fix. Making payments on time, keep your borrowing low and being a good borrower will all help raise your credit score. You can also access bad credit car loans if you really need a new car.

Sporadic or insufficient income

If you’re self-employed, a freelancer or don’t work regular hours, this can count against you. Car loans are decided on affordability and if your wages aren’t regular, that can be looked upon unfavourably by lenders.

You options are to have as little debt as possible, prove you can afford the loan, use a co-signer or borrow less. Most lenders appreciate the world of work has changed but still require you to be a low risk.

Debt ratio too high

Your debt ratio is the amount you owe compared to the amount you earn each month. If you are in debt and have relatively little spare cash each month, your debt ratio is regarded as high. If you owe very little and have cash surplus each month, your debt ratio is low.

High debt ratios mean you have to pay off as much as possible to lower the amount you owe. There is no real way around this aside from borrowing less as every lender has to take into account your debt ratio.

Error on the application

You would be amazed at the number of times car loan applications have been refused purely on administrative errors. Double check the application form and make sure everything is correct Even a simple error such as incorrect postal code or house number can cause a loan application to be refused.

If you’re looking for a car loan and need some help, visit your nearest Car Nation Canada dealership. Our experts can walk you through the entire process and make sure you get a great deal. Try us and see what we can do for you!

Categories: News

Tags: ,