Three reasons why your vehicle loan may be denied
3 Reasons Why Your Vehicle Loan May Be Denied
Hi Jannou this question may sound silly but do vehicle loans ever get denied and if so what are some reasons that they do.
Dear reader, this is an excellent question to which I am sure many others would like an answer. Simply put, the answer is yes, as with any other loan, a vehicle loan application can be denied. However, you should not be discouraged if you apply. To avoid this, keep an eye out for these 3 mistakes and some tips to help you avoid them.
1. Insufficient income
when looking for a car loan one of the first things we do is assess your income. This is done to determine whether you can meet the monthly payments and other obligations that you may have. This assessment will give an idea of what your net surplus is and having a low net surplus may result in your loan being denied. This can be determined by using a budget sheet to review your most recent pay stubs and expenses. This is where we will access all expenses and spending, such as outstanding debts, utilities, and groceries to name a few. During your loan interview, you will be asked a series of questions about your monthly spending habits so that we can determine whether you can comfortably afford your loan payments. It is critical that you are open and honest with your loan officer about these figures. Being approved based on inaccurate information can be very stressful, especially if your income is insufficient. If you do not have enough income or if your expenses exceed a certain percentage of your income, your loan may be denied. As this increases your chances of defaulting on your payments.
Have insufficient income? Here are a few things you can do to help with this.
- Reduce your expenses: One thing you can do to avoid being denied because of a low net surplus is to cut your expenses. This could entail canceling your numerous subscriptions, eating more home-cooked meals or resisting the urge to splurge on entertainment or shopping.
- Pay off other debts: Before applying for a vehicle loan, you should consider paying off other debts such as high-interest credit cards. This will leave you with additional funds not only for your monthly payments but also for maintenance. To assist with this, consider using the snowball method: pay off small debts first, then move on to larger ones once they are paid off.
Generate additional income: Another option is to generate additional income. This will give you access to more funds, which you can use to apply for a vehicle loan. However, keep an accurate record of all extra income to present to your loan officer. Use receipt books and any other documents that show how much money you have generated. There are numerous ways to generate passive income. Turn your hobby into a business.
2. Past loan delinquencies:
Past loan delinquencies may also cause your loan to be denied. Before moving forward with the application, a credit check on each member is performed as part of the loan process. This will provide an evaluation of your previous loan history, not only with the credit union, but also with other financial institutions or lenders. If the report reveals a poor credit history (regular borrowing from multiple institutions) or a history of delinquency, this is used to predict whether you will pay your loan. Your loan may be denied because the risk of you failing to pay or paying late is too great.
To avoid this, ensure you:
- Repay all your bills on time and if you are unable to make payments contact your lenders and explain your situation. Contact our delinquency department if you are having trouble paying back your current credit union loans so that you can be given advice on your next steps.
- Set up automatic transfers by processing a salary deduction form to guarantee that payments are made and received on time.
- Try to pay off these existing delinquent loans or bringing them up to date before applying. This will demonstrate your desire to enhance your credit history. You can also consider debt consolidation as a possible solution to better manage your payments.
Allowing a loan to default could make it difficult to obtain financing in the future.
3.Missing documentation
If you lack the required paperwork or information, that could be another reason why your loan application may be denied. If necessary, information is not provided, the loan application process cannot proceed or be completed. Have all necessary documentation on hand to prevent delays or even rejection.
Before beginning the loan application process, speak with your loan officer and compile a list of all the items you will require. See link for list of documents we would require from you. https://bit.ly/3XxYg27
Written by: Sheralye Alcindor
