Most drivers now rely on some sort of credit, finance, or lease to help them get a car. If you’ve applied for finance and you’re struggling to get approved, you may be left wondering why. A car finance decline can be disheartening, especially if you can’t afford to pay for a car with cash alone. Car finance lenders need to control the applicants who they approve for finance and can’t offer a loan to anyone who isn’t suitable or can’t afford to pay it back. If you don’t meet the lenders criteria, you may be declined a car loan and if this happens, what should you do next? Let’s find out!
Why might you be refused car finance?
It’s never guaranteed you will be accepted for a used car on finance and the lender you are applying with will have a certain criterion you will need to meet before you can be considered for a loan. There are a number of common reasons why you have been declined for finance.
- Low credit score. The most common reason why lenders may decline your finance is a bad credit score. A history of missed payments, defaults on your credit file, going bankrupt or lack of previous credit can lead to a low credit score and increases the risk to lenders. Typically, a good or excellent credit score, a long history of managing credit properly and a finance savvy person is most favourable to lenders.
- Insufficient income. Lenders set their own minimum income criteria, and, in some cases, you may be refused because you simply afford to take out a car loan. You will need a steady, provable monthly income in order to get approved.
- Identity can’t be verified. When lenders give out money to buy a car or buy a car on your behalf, they need to verify you are who you say you are and be able to trace the car if you fail to repay. Usually lenders will run a credit check upon applicant and if your details don’t match up with your application, they may refuse you.
- No full UK license. You may be surprised how many people apply to finance a car when they can’t legally drive. You will need to hold a full UK license first before you can be considered for finance.
What to do if you can’t get a car on finance?
If you’re in a position where you’ve been declined car finance, you may be wondering what to do next and your chances of ever getting a car loan.
- Stop applying for finance. It can be tempting to apply with as many lenders as possible to see how will accept you, but you could be harming your credit score in the process. Making too many applications for finance in a short space of time and getting declined can have a negative impact on your credit score.
- Ask the lender why you were refused. If you’re declined for finance, you can ask the lender on what basis you were refused. Getting this information and advice from the lender can help you work out your next steps and figure out how you can increase your chances.
- Check your credit file. If you’re in a position where you’ve been declined due to low credit, your credit file is the best place to start. You can check your credit file for free and it can be really insightful to your credit situation. You should check all the information listed on your credit file is accurate and up to date as misinformation can affect your ability to get approved. If you credit score is low, you should take a few months to sort your credit situation before applying for anymore finance.
Find a specialist lender. If your credit is low or your circumstances are adverse, you may not qualify for a loan from a mainstream or prime lender. It can be working finding a subprime or bad credit specialist as it could increase your chances of approval. Alternatively, you could use a finance broker to help find the right deal from a wide range of trusted lenders.