If you are looking to buy a vehicle but do not have the money to make the purchase, you will need to get an auto loan. But what if you’ve applied for a loan and were denied? Then, you will need to identify the reason and rectify the problem to be approved. Everyone knows that bad credit is a major hindrance for a successful loan application. But there are a host of other things that could also hinder you from being approved for an auto loan. Here are some common reasons people often overlook:
Have you just applied for a mortgage or student loan? If so, it is probably not the best time to apply for an auto loan.
When you apply for a loan, especially without collateral, lenders will perform credit checks. These credit checks along with the debt you take on with those loans may lower your credit score. And as you know, lenders are less likely to approve a loan for a person with lower credit scores.
You may also want to delay applying for an auto loan if you’ve started a job where you are still in the probationary period. This probationary period, which is usually 3 months, allows an employer to terminate your employment if they do deem you suitable for the position. Therefore, during that period, there is no job security. For that reason, a lender may want to deny your application until you are you have become a full-time employee as then they are more certain of your ability to honour your monthly payments.
Errors on your credit report
Credit reports are not always accurate. The credit bureaus that create and handle these reports often make mistakes. For example, a notation should not remain on your file for more than seven years after you’ve filed for bankruptcy for the first time. However, in some cases, such a notation is not removed after that time. In other instances, billing mistakes could result in a missed loan payment being shown as a collections report. These inaccuracies can greatly affect your creditworthiness in the eyes of lenders. A lender who sees such information will not know it not accurate and will be discouraged from approving your application as they will assume you are too risky for a loan. To prevent this from happening, you should check your credit report at least once a year. And if you do so, and spot any errors, you must dispute these claims, so the credit bureaus can make the necessary adjustments.
A series of documents are required for an auto loan application. Your loan application will not be processed if you omit any of these documents from your application. To ensure you do not get rejected, ensure you supply all the documents you are asked to provide.
While you are not likely to knowingly provide wrong information to a lender, you may mistakenly do so if you do not spend the time to carefully check your documents. Simple things such as spelling mistakes or wrong addresses can result in an auto loan being denied.
Irregular income patterns
If you are self-employed or work on commission, your income will vary each month. You may find it more difficult to get an auto loan. Lenders look for consistency when determining whether to offer someone a loan. When your income fluctuates, there is a chance that your income may be low some months making it more difficult for you to make your loan payment. You will have the same problem if you have income that the lender cannot verify. In such situations, a co-signer with consistent income may make it more likely for your loan application to be approved.
Little or no credit history
The amount of credit history you have can affect your loan application. It takes some time before you can build a strong credit history. If you are young, just started applying for credit, or recently moved from another country to Canada, you will likely have this problem. You may then want to get a co-signer for your loan.
You cannot afford the amount you are asking for
If you are trying to get a loan to buy an expensive car that will give you a very high debt to income ratio, it will be very difficult for you to be approved for such a loan, even with an attractive credit report. To fix this problem you will need to lower your expectations and opt for a vehicle that is within your means.
Do you need a bad credit auto loan in Burnaby or Surrey?
If you have followed the abovementioned tips and you are still having trouble getting an auto loan because you have bad credit, come see us at Instant Auto Loans. Instant Auto Loans offers bad credit auto loans in Burnaby and Surrey based on the equity in a vehicle you already own. So, what are you waiting for? Apply now and have your loan approved in as little as 15 minutes. Or give us a call if you have any questions.