Next Steps after Car Loan Rejection
So you recently face car loan rejection in Ontario eh? That sucks but it’s not the end of the world. What you need to figure out now is your next steps, curling up in bed and crying is always a valid option but this article will walk you through some steps you can take if you’re feeling more productive.
1. Figure out Why
Lender’s are not required to tell you why they rejected a loan, so to figure it out you’re going to have to do some investigating. If you’re lucky you’ll be able to ask the lender for a reason, but if not the best place to start is your credit report.
The most common cause for a car loan rejection are that you asked for too much, or that something on your credit report scared them off, you need to figure out what it was. Here are the most common reasons for car loan rejection in Ontario:
- You want to borrow too much
- You have bad credit
- You have an insufficient credit score
- You don’t have sufficient income or sporadic income
- Your application included errors
Errors can sometimes pop up on reports and lenders don’t know the errors from real facts. If it's not an error then it could be a low credit score, or perhaps they decided that you already have too much debt and it’s too much of a risk to give you more.
If nothing on the credit report seems out of the ordinary, the last place to look is the application itself. If you have a copy, the rejection could be as simple as a mistake made during the application.
2. Fix the Problem
Once you’ve diagnosed the problem you can take steps to fix it, obviously the steps will be different depending on the problem but we’ll go through each of them one at a time.
If there's an error on your credit report you need to get in touch with the credit bureau and have the error fixed, it’s a bit of a hassle but well worth it, especially if the error is having a serious effect.
If your credit score is too low you’re going to have to start building it up, there’s many ways to do that but the easiest is to make regular purchases with credit and pay them back on time.
If you have insufficient or sporadic income this is harder to address. you can borrow less, get another job, use a larger down payment or improve your financial situation in other ways to overcome this.
If you have too much debt already then you’ll have to pay some of them off first, check the prepayment policies to see if any don’t have prepayment fees and focus your attention on those first.
If the issue is that you were asking for too much that could also be because of the previous factors, and working on those may fix it. Or you were simply asking for more than the lender is ever willing to give.
Alternative Solutions after Car Loan Rejection in Ontario
Shop Around: Lenders vary greatly in what they do and do not approve. If you've recently faced car loan rejection in Ontario from a specific lender, try shopping around and see if any other lender would approve you for the same deal.
Get a Cosigner: A Co-signer is someone who signs a loan alongside you, which means that if you default on a loan your co-signer takes on your debt instead. Lenders are always much more comfortable approving a borrower for a car loan when a co-signer is involved because it negates risk on their investment.
Wait and Improve your Financial Situation: A lender simply might not see you as a suitable borrower for a car loan. Take some time to try and rebuild your credit and/or improve your financial situation. Keep working hard at this and you'll find yourself approved for a car loan in no time.
We’d love to help you find your next bad credit car loan. Simply fill in the form below and we’ll get back to you ASAP!