One of the most disappointing aspects of financing is that while you may consider yourself a suitable candidate for a loan, banks and other financiers don’t always see it the same way. Even more frustrating, when this happens you’re rarely afforded any detailed insight or knowledge regarding why your car loan application was rejected.
Although you may be keen to begin looking into other avenues of financing, you shouldn’t disregard the reasons that may have contributed to a lender not having faith in your ability to repay the loan on time. Here are some of the more common areas of concern that you should consider before you apply for your next car loan.
Your credit score, which is a picture of your credit history, will be considered in detail by a lender when you apply for a loan. This summary will provide financiers a snapshot of any existing and/or prior loans that you have held, including your repayment history. If they see signs suggesting you have a habit of falling into arrears, your car loan application is more likely to be rejected. Furthermore, evidence of multiple loan applications – whether approved or not – will diminish your standing as an individual with steady financial backing.
Income plus Other Assets and Debts
Perhaps the most prominent consideration for a financier is your current income level. Even if your income is sufficient to meet repayments, this is insufficient. Lenders will want to see a buffer that provides coverage for any unforeseen expenses, in addition to other debts and obligations like utility bills, credit cards, car expenses, tax liabilities, and other loans. A financier may also assess assets in your possession – either as a means to understand what guarantees or security you could provide, or as a picture of your broader ‘wealth’.
Your Employment Status
Financiers often look more favourably upon those who are not only working full-time, but those who have a steady employment history. If you are one to chop and change between companies, have gone some time without employment, or you are currently unemployed, lenders will have some concerns about your ability to make repayments. Similarly, if you have only recently begun a new job, the fact that you are still in a probationary period could work against you.
An Unstable Lifestyle
Lenders will also look for signs that suggest you may lead a more volatile or unstable lifestyle. For example, if you have regularly moved house, or been party to a rental agreement through non-official sources (e.g. you are not a party listed on a lease). In such instances, financiers will be conscious that you may be a more risky candidate to fulfil your obligations under the loan given a lack of stability.
The Fincar team is here to help you with all your financing needs. Contact us today to help arrange your next car or equipment loan.