When it comes to making a vehicle finance application, unfortunately not everyone is guaranteed approval. There are a number of reasons as to why an application would be declined, and we’ve explored the top five reasons below:
1. Poor Credit History
One of the most common reasons for being turned down for a loan is having a bad credit history. If you have a lot of negative marks on your credit file, from things like missed or late payments, you’ll be seen by lenders as being a higher risk.
Your credit score is calculated from information that can be found on your credit report. This will include any credit you’ve taken out over the last six years, as well as regular payments such as your utility bills.
Having a low credit score can also be the result of not having much of a credit footprint. If you’ve not taken out much credit previously, and therefore don’t have a lot of information on your credit file, lenders are unable to see how you manage your money. This means that they don’t know what sort of risk you present, so may be less inclined to lend to you.
All lenders have to look at your affordability, alongside your credit history, when they make a loan decision. This is to ensure that you’re able to comfortably afford the instalments, without putting yourself in any difficulty.
If you didn’t complete a budget before making a loan application, you may not be aware how much disposable income you have. Lenders will assess your disposable income, and see whether you can afford to make the due payments, while still having enough left over to cover unexpected expenses.
If you don’t have a huge disposable income, you may need to consider spreading your loan over a longer period of time, so that the monthly instalments are lower. Do bear in mind that you may pay back more interest overall by doing this though.
3. Your Age
Although your age won’t always be a good indicator of how good a driver you are, or how recently you passed your driving test, it’s something that many lenders take very seriously. You won’t be eligible for any form of vehicle finance until you turn 18, and many lenders won’t consider your application until you are aged 21 or above.
It’s also worth noting that some car finance providers are unlikely to accept applications from older people, as they are concerned about their ongoing ability to make repayments. So if someone were reaching the age of retirement, they may not be considered for a loan.
4. Your Employment Status
Every lender will have slightly different criteria when it comes to vehicle finance, and not all lenders ask that you be employed to qualify, as long as you’re in receipt of a regular income. However, most car loan providers will expect you to be in full time or part time employment.
You may also be expected to be earning over a certain amount each month. For example, when you apply through Vehicle Finance Today, you will need to be earning at least £1,000 per month.
5. Eligibility Criteria
As mentioned above, no two lenders will have the exact same lending criteria. You may have been turned down previously simply because you didn’t meet the specific requirements of one particular lender. You may still be eligible for vehicle finance with many other lenders.
It’s important to look through the criteria listed on a lender’s website before applying. That way, if you meet these specifications, you can feel more confident that you’ll be approved for a loan.
Can You Get Car Finance If You’ve Been Refused Previously?
The simple answer to this question is yes – you may still be eligible for car financing, even if you’ve been turned down in the past. If any of the above reasons apply to you, and you know why you were refused before, there could be things you can do to improve your chances when you reapply.
To help you get started, we’ve looked at the ways in which you can increase the likelihood of an approved application. These include increasing your credit rating, looking at your car finance options, and using a broker service.
What to Do After Declined Car Finance
If you’ve been turned down for vehicle finance, this doesn’t necessarily mean that you’re not eligible. There are a few things you can do in order to improve your chances of getting a car loan when you reapply – we’ve outlined our top three tips below:
1. Improve Your Credit Score
Perhaps the most common reason for being refused vehicle financing is having a low credit rating. However, you can take steps to boost your credit score, some of which could get you instant results!
The first thing you should do is to check your credit rating, through sites like Credit Karma. That will give you a starting point, and you’ll then be able to measure your progress. It’s also a good idea to request a copy of your credit file from one of the UK’s three main credit reference agencies, Experian, Equifax or TransUnion, so that you can look for any incorrect information, and request to have it amended. Once you’ve looked into your credit score and report, you can start to build up your credit rating.
One of the easiest ways to do this is to register on the electoral roll. By registering here, you are proving that you live in the UK, and it also helps to verify other information on your credit file. You can ensure your name is on the electoral register by visiting the government website.
Another simple way of improving your credit score is to try using Experian Boost – by linking your current account to your Experian account, you might be able to increase your score in minutes. Any subscriptions that are reported on your current account, such as Netflix or Spotify, will be used to demonstrate that you are able to make regular repayments, helping to boost your credit rating.
2. Consider Your Finance Options
When you made your initial application, there’s a chance that you didn’t fully consider all the options available to you. For instance, you may have opted for a Hire Purchase (HP) agreement, without realising that the payments for a Personal Contract Purchase (PCP) deal tend to be lower. And if you were declined because of the affordability of the loan, choosing the option with smaller monthly instalments could mean your next application is approved.
It’s therefore important to learn more about the different car financing options. The two most common are Hire Purchase and Personal Contract Purchase, but you may want to look into things like no deposit vehicle finance, or negative equity financing too.
3. Use a Broker Service
One of the best things about using a broker service when applying for vehicle finance is that you’re essentially applying with a number of lenders. A broker will have a panel of trustworthy lenders, and they’ll present you with the most suitable option. That way, you only have to apply with the one lender.
When you have been declined for car finance, it can be tempting to start making applications with lots of different lenders, to see if any will approve your application. Unfortunately, this is likely to negatively affect your credit rating, making it even more difficult to secure loan approval. Each time you make an application, the lender will run a hard credit check, which can lower your score.
That’s why it can be better to apply through a broker service like Vehicle Finance Today. We will do our best to put you in touch with a car finance provider who is likely to approve your application.
Another great thing about applying through a broker is that they can connect you with more specialist lenders. Bad credit car finance providers, for example, may be able to help you even if you have a poor credit history.