Your bad credit auto loan application was rejected. This is mostly bad news. Applying for a second chance loan is not easy. It requires several documents that prove your “worth” as a borrower. The process of assessment and approval also takes longer compared to a regular car loan. However, after all your efforts, your application was rejected. What’s next?
What To Do After a Bad Credit Car Loan Rejection
Why is my car loan rejected?
Banks and lenders refuse to grant approval for a regular car loan if the applicant failed to pass their set of requirements for a car loan. The same is true with bad credit car loans, although the criteria for approval would be different from a regular car loan.
Second chance auto loans are for people with bad credit. This includes clients that may have declared bankruptcy in the past, has black marks and defaults in their credit profile as well as those individuals that have a bad credit score. However, even with less strict requirements, chances are, you can still get refused for a loan.
Here are some reasons why your bad credit auto loan application is rejected:
1. You have too many defaults in your credit report
Defaults on your credit file is not a big deal for second chance lenders most especially if they have been around for more than 3-5 years on your credit history. The longer they are in your credit history, the less likely they become insignificant.
Several defaults that have been around for a year or less creates a bad impression for you as a potential client. Such details indicate that you are still in a bad place in terms of your finances.
2. Insufficient income to repay a loan
Non-conforming lenders will still check your capacity, as a client, to repay a bad credit car loan. Even with a better credit score and fewer defaults and marks on your credit history, it is still important to see if your borrowing power is enough to pay for the car loan that you seek.
If a lender sees that your salary and current financial obligations are not within a certain percentage that makes it feasible for you to repay an auto loan, your chances of rejection increases. By law, it is not also allowed for a lender to lend you money that you can’t afford to pay.
3. You failed to do your research
Prior to applying for a bad credit car loan, you should have done your research to increase your chances of getting a car loan approved. If you failed to read our earlier article Top 11 Tips to Follow for Bad Credit Car Loans Guaranteed Approval, this is the time to do so. You are already considered as a client with bad credit. Failing to be aware of what increases your chances in getting a car loan and complying with the necessary steps can be considered as the culprit behind your failed bad credit auto loan application.
Can I re-apply for a bad credit car loan after being rejected?
Yes, you can! But, this time around, it would be better to prepare, apply the 11 tips we mentioned above and go over these helpful videos to increase your chances of getting a bad credit car loan approved.
These additional tips can also help you increase your chances of getting a bad credit auto loan approved the second time around.
1. Ask your lender why your application was disapproved
Lenders are more than willing to inform you about the issues and problem that lead to the disapproval of your loan. Take these points constructively and improve in these areas to get better chances or even guaranteed approval on your next application.
2. Improve your credit
Review your credit report. Are there areas where you can work on to improve? Work on them. It would be advisable to try re-applying for a bad credit car loan a few months after being rejected. Too many inquiries that lead to a rejected loan application are also noted on your credit report. You do not want lenders to see this the next time you apply for an auto loan. Get rid of defaults that you have in your credit report. Pay your debts and pay your bills on time to improve your chances of getting car finance.
3. Save for a bigger deposit
A bigger down payment for a car purchase means that you’ll need a lower amount for your loan. Higher down payments create the impression that you are indeed financially stable to repay a loan. You’ll be able to save more in terms of interests when you pay for a higher deposit.
4. Go for a cheaper car loan
If possible, go for a car model that is cheaper than your first option. Your current income may not be enough to qualify for the car that you really want. Your re-application would have better chances of approval if you opt for a loan workable with your current finances.
5. Improve your finances
Getting a better paying job, asking for a raise or having a sideline as an extra source of income gives you extra cash and extra line of credit. Use the extra cash to save up for your deposit, to get rid of debt or to simply build your income for whatever you intend to purchase in the future.
A bad credit car loan rejection is not the end of the line. You can still re-apply for another bad credit car loan and get the approval that you need to purchase your dream vehicle. Intellichoice can help you improve your chances of getting a car loan approved. Call us today for assistance.