Why Car Finance Is Refused And What To Do

06 May Why Car Finance Is Refused And What To Do

Having your car finance refused can put the brakes on your car ownership dreams. But there are steps you can take to rectify the problem. Whatever’s holding back your car finance application, from bad credit or affordability, to age of the borrower or the type of car, take a look at some of the most common reasons why car finance is refused and what to do about it.

Credit score

Your credit file is an important part of any credit application that you make. It contains a history of your financial transactions – including all credit applications that have been approved or declined in the past – and repayment history – including defaults, late or missed repayments. All of this information makes up your credit score, a ranking that lenders use to determine how likely you are to repay your debt on time.

A poor credit score could mean your car finance is refused, and you may need to spend some time improving your credit score. Here are some ways to do this:

• Firstly, find out what your credit score is by requesting a free credit report.
• Review your credit file and report any errors to have these resolved.
• Check that your personal information is correct and up to date.
• Repay your existing debt on time and avoid missing any repayments.
• Reduce your credit limit on high interest credit cards.
• Consider debt consolidation to get on top of debt.
• Avoid making multiple credit applications at one time.

If you need some extra funds to meet your financial needs, talk to us about your options for a bad credit loan. By paying off a bad credit loan you demonstrate your ability to manage repayments which could help boost your credit profile.

Affordability issues

Affordability is understandably a major consideration for car finance lenders. If your expenses outweigh your income, or the lender believes you simply don’t have enough left over to cover the cost of your car finance repayments once all your bills are paid, it’s unlikely your car finance application will be approved.

If you’re struggling to make the figures work for you, you may need to consider how you could increase your income or reduce your expenses. Another option is to have someone act as co-borrower – a partner or a family member who can apply for car finance with you so your joint incomes are used in your application to determine affordability.

Age of driver

Age is another factor that can impact the success of a car finance application. Generally, the younger you are, the harder it is to get car finance approval. That’s because most NZ lenders have an age limit for lending, and only a small handful will consider car finance lending to borrowers aged between 18 and 21.

Another reason age may be a factor is that it takes time to build up a credit history and credit score, and being younger means there’s less opportunity to apply for credit and less time to repay the debt to build up a good credit history.

If you are under 21, you may need to apply for car finance with a co-borrower or a guarantor, someone who can guarantee that your car finance will be repaid and is liable to repay your loan if you are unable to do so. Or alternatively, a cash deposit may be needed.

Type of vehicle

Finally, the type of vehicle being financed and its age will affect a car finance deal. For example, an older car that may not be fitted with the latest safety features could be seen by lenders as having too much risk, while a vehicle with high mileage generally equates to more repairs and maintenance costs, that could drain a borrower’s finances and impact their ability to meet their repayments. Many lenders are also reluctant to approve car finance for race cars or rally cars, due to the level of risk involved.

Talk to a Max Loans Personal Lending Adviser about the type of vehicle you’d like to finance. We’ll listen to what you need and do our best to match you up with a suitable lending option.

A successful car finance application

If you’re ready to upgrade your old ride to something newer, or you’re in the market to buy your first car, car finance could help you buy your dream car much sooner. To ensure the best success in your car finance application, get in touch with the team at Max Loans today and let us help you compare loans NZ wide to find the best solution!

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