Have you ever wondered why auto lenders say no? You found the perfect car, but now you cannot buy it. Every auto loan financer has denied your application, and you still have yet to figure out why. Delving into the specifics of the loan evaluation process takes some time. Here are some of the chief reasons that auto lending requests get turned down.
A credit score below 660 makes it tough to find an auto loan. Similarly, so can:
- Having 30 day or more delinquent payments
- Declaring bankruptcy within the last five years
- Causing a foreclosure or charge-off in the past two years
- Having a debt-to-income ratio of 50 percent or higher
Any of these factors can cause a lender to consider you to have a “subprime” credit status. Two or more of these circumstances can create a really low chance of being able to get a loan. Banks and lenders will assume that you are a bad risk given your financial past.
Avoiding debt should be a good thing. Unfortunately, our society wants people to be able to prove that they can handle debt. Never taking out a credit line and having limited bank-based assets will leave credit reporters and lenders with little information to go on.
Without a solid demonstration of financial responsibility, they will make you wait until you have enough credit to form an appreciable score before agreeing to any kind of loan arrangement.
Improper or Inadequate Loan Documents
Loans require a huge pile of forms to be filled out. Making one mistake on those forms could be enough to shut you out of a loan with that lender.
You may also not have access to all the required documentation. Maybe your tax returns are inaccurate, or you cannot prove your income levels to their satisfaction. Lenders want to know that you can afford a loan payment after covering all monthly living expenses. Without being able to prove these numbers, the bank may get nervous and reject you.
Not the Right Lender for You
Many lenders have different expectations and priorities when it comes to giving out car loans. Some are tighter with their purse strings than others.
You should always shop around to see what other lending institutions might say, even after you have been turned down repeatedly. For instance, local credit unions are more willing than large banks to give out loans they think will benefit the community.
What to Do After You Have Been Told “No”
Even if you have tried as hard as you could to fix the above problems, you could still end up being refused a car loan by everyone on the block. If this sounds like you, there may be another option.
Lots that say “Buy Here Pay Here” offer on-site financing for their own vehicles. They may have stricter terms than most typical lenders, but they are much more forgiving when it comes to a tarnished credit history. If you have tried everyone you can think of but still heard “no,” you can approach a dealer-financed business that will most likely say “yes.”