5 reasons why you can’t get a car loan (and what to do next).

Berry Mathew

5 reasons why you can’t get a car loan (and what to do next).

When it comes to getting a car on finance, it’s always worth remembering that a car finance approval is never guaranteed. For applicants who are struggling to get approved, you may be wondering how or why your finance has been declined. In many cases, it can be as simple as the fact that you do not need the lenders criteria. Top help more people get approved for a car loan, the guide below looks at the top 5 reasons you may be refused car finance and what to do to increase your chances of approval. 

  1. You’re too young or too old.

Car finance is a legal agreement which means that you will need to be at least 18 years old before you can be accepted. Similarly, there can also be a maximum aged limit for car finance too. It can depend on which lender you choose but usually the cut off for finance agreements is around 75 years old. 

  1. No previous borrowing history. 

Lack of credit history means that lenders can’t predict which type of borrower you will be. It may seem silly that you need a credit history to get credit, but car finance is a big purchase and lenders want to know how likely you are to pay your loan back on time and in full. If you’re a young driver getting a car on finance, you may not have yet had chance to build a credit history so it can be worth considering before you start applying. 

  1. You can’t afford finance. 

In some cases, you may be declined car finance due to the simple fact that you can’t afford it. You will be required to undergo an affordability check when you apply for finance to see how much you could comfortably put towards your finance payments each month. If you have a low income, lenders may reject your application based on the inability to meet repayments. 

  1. You can’t drive yet. 

It can be much easier to get approved for car finance once you have a full UK license. If you’re currently learning to drive with a provisional, don’t have a license yet or have a driving ban in place, you will usually be declined for a car on finance.  If you’re learning to drive, it can be best to wait till you’ve passed your test before you start applying for finance. 

  1. Missed or late repayments in the past. 

Your credit score is calculated by a number of factors but missed payments, CCJs, late repayments or defaults on credit accounts can seriously impact your score. Mishandling credit in the past increases the risk to future lenders as you’re more likely to default on future loans and lenders may decline you on this basis alone. 

What to do if you’ve been refused a car loan? 

Having your car finance application rejected can be really disheartening and whilst car finance can’t be guaranteed by any lenders, there are a few things you can consider before you start applying for car finance again to increase your chances of approval. 

    • Reduce the number of applications you’re making. If you’ve recently been declined car finance, the first thing you should do is stop applying. It can be tempting to try other lenders but making multiple applications for finance in a short space of time can negatively impact your credit. 
    • Check your credit file. You may be surprised how many people apply for finance and don’t even know what is reported on their credit file or what their current credit score is. You should get into the habit of checking your score regularly and making sure all of your information on your report is accurate and up to date. Misinformation on your credit file can have a negative effect on your score.
    • Wait till you have a full UK license. If you’ve not yet passed your driving test, it can be better to wait till you have a full UK license before you apply. Some lenders can offer finance on a provisional license, but you will have much more choice once you’ve passed which means you could get a better rate.
    • Save for a deposit. There are many finance deals that don’t require a deposit contribution. However, having a deposit to put down for car finance can help to secure the deal. Lenders like applicants who have deposit as it helps to reduce how much they need to lend out and also shows good financial responsibility. A deposit contribution can help you to save money on car finance deals as it lowers the loan amount. 
    • Prove your affordability. You will need to prove your income when it comes to getting a car on finance as lenders need evidence that you earn what you say you do. They can usually do this by requesting 3 months’ worth of bank statements or pay slips. If you’re self-employed and get paid cash in hand, it can be a good idea to deposit any earnings into a UK bank account as it makes it much easier to prove your income.