Looking to purchase a new car, but refused car financing. This can be really frustrating, but it isn’t the end of the road, as you still have a number of options.
1. Bad Credit
Bad credit is one of the main reasons car finance is denied. Companies view those with bad credit as a higher risk than those with good credit. In turn, they are likely going to refuse an application from someone with bad credit.
People’s credit scores can be affect by outstanding debt and missed payments. An example is a County Court Judgment or defaulting on payments, which can remain on credit reports for up to six years. The silver lining is the older they are, the better it is for the purpose of lending.
Bad credit is not the only thing that can hold you back from getting financing. Sometimes having no credit at all can hurt your chances of being approved for financing. Generating a credit score doesn’t happen overnight, therefore your credit report may not contain enough activity for you to have a credit score.
Are you not registered with the electoral roll? Have you recently moved? These are also things that can affect your credit score because they’re used for identification purposes.
2. Your Age
Many lenders factor in one’s age when refusing or approving car finance. If you’re 17 years old, then you probably will have to wait until you’re 18 to get financing. Finance agreements can only be offered to those who are 18 or older.
However, some lenders will refuse to finance you if you’re between 18 and 21 years old. This is because they have their own set of criteria. You should shop around because there are a few lenders who do give financing to younger people.
3. Your Employment Status
Different lenders have different requirements borrowers need to meet before they are approved for car financing. Affordability and risk levels are two key requirements. If you have just started working at a new job, self-employed or have an unstable work history, then your application could be refused.
Being employed isn’t always a requirement. However, you will need to show you can make the payments back. Demonstrating your ability to make payments will increase your chances of getting approved.
4. Affordability
Lenders can’t just give financing to anyone. They need to be responsible, which is why they look at your outgoings and at your income. Lenders want to make sure you can repay the loan back. Here’s a tip: try to come up with a large deposit because this will lower your monthly payments.
5. Requirements
Lenders have requirements you need to meet before you are approved for financing. Different lenders have their own set of requirements, so feel free to shop around, you may find bad credit car finance. Before you apply for financing, you should check what a lender’s eligibility requirements are.
Here’s What You Can Do If You’ve Been Refused Car Financing
Just because you were refused car financing doesn’t mean you won’t get the car you want. There are several steps you can take when refused financing. These steps include:
1. Build Up Your Credit Score
Were you refused financing because of your credit score? If so, then you can take steps to improve it. Before you do anything, you’ll want to view your credit report. This will help you determine what you need to work on in order to improve your score.
The top ways to boost your credit score include:
. Make sure every detail is correct in your file. If details are not correct, then contact the credit agency. They’ll be able to update everything
. All of your payments should be made on time
. Payoff your balances or pay them down
. Speak to creditors to workout a more affordable payment plan
. Register to get onto the electoral roll
. Don’t apply for several applications
Don’t immediately apply with another lender when you’ve been refused from a different lender. This could actually have a negative impact on your credit score. Remember, some lenders perform hard searches on prospective borrowers’ credit reports.
Hard searches allow lenders to dive deep into your credit history. They will see what kind of credit you had, how you managed it and things of that nature. Lenders perform hard searches because they want to know what kind of risk they are taking on if they approve your application. Nonetheless, your credit file will be impacted by a hard search.
Lenders will likely want to know why you applied with multiple companies if a hard search reveals this info. A soft search gives lenders enough info so they can determine if they can approve your application. However, soft searches don’t leave a negative mark on your credit report.
2. Find A Different Lender
There is no shortage of lenders out there, and each one has their own set of requirements. Find a lender will assess your needs, as well as current situation. Whether you’re after a brand new car, used car or a nearly new car, we are here to help you find a financial solution.
3. Choose The Right Financing Option
There are several types of financing. This includes personal contract hire, hire purchase, lease purchase and personal contract purchase. Determine which financing option is right for me.
4. Speak To A Different Broker Or A Different Dealer
If you’re applying for financing through a certain broker or dealer, then they are likely tied to a specific finance company. This is usually the case with franchised car dealerships. The bad thing with these lenders is refusals are quite common because diverse circumstances are often taken into consideration when reviewing applications.
We know everyone doesn’t have the same financial history, as everyone’s past and current circumstances differ. This is why we believe your financial history shouldn’t prevent you from getting financing. We encourage you to contact us today if you are seeking financing for a vehicle.
