Can Loan Denied: Why It Happened & What To Do Next

Buying a car is an important decision, and often involves taking out a car loan to finance the purchase. However, sometimes the excitement of the car-buying process can come to an abrupt halt when your car loan application is denied.

This can be a frustrating experience, but it’s important to understand why your application was denied and what steps you can take next. Let's get started!

Why Was Your Car Loan Application Denied?

There are several reasons why your car loan application may have been denied, here they are:

• Low Credit Score: One of the most common reasons is a poor credit score. Your credit score is a number that reflects your creditworthiness and is used by lenders to determine if you are a high or low-risk borrower.

If you have a low credit score, it indicates that you have a history of missed or late payments, defaults, or other negative credit events. This can make lenders hesitant to approve your car loan application.

• Insufficient income/employment history: Another reason your car loan application may have been denied is due to insufficient income or employment history. Lenders want to ensure that you have a stable source of income to repay the loan. If you have a limited employment history or low income, it may be difficult to convince lenders that you are capable of repaying the loan.

What to Do Next

If your car loan application has been denied, the first thing you should do is find out why. Lenders are required to provide you with a reason for denying your application, so don’t be afraid to ask. Once you know the reason, you can take steps to address it.

If your credit score is the reason for the denial, you may need to work on improving it before reapplying for a car loan. Start by paying all of your bills on time and reducing your debt.

You can also obtain a free copy of your credit report from one of the two credit bureaus in Canada, Equifax, and TransUnion, and review it for errors. If you find any errors, you can dispute them with the credit bureau to have them removed.

If your income or employment history is the reason for the denial, you may need to wait until you have a more stable source of income or a longer employment history. Alternatively, you can consider finding a co-signer for the loan.

A co-signer is someone who agrees to take on the responsibility of repaying the loan if you are unable to. Having a co-signer with a good credit score and stable income can help convince lenders to approve your application.

Another option to consider

Look for a different lender. Different lenders have different criteria for approving car loans, so just because one lender denied your application doesn’t mean that another lender will.

You can also consider alternative financing options, such as a personal loan or line of credit.

If your car loan application has been denied, don’t give up hope. Take the time to understand why your application was denied, and then take steps to address the issue.

This may involve improving your credit score, finding a co-signer, or looking for a different lender. Remember, there are always options available, so keep an open mind and explore all of your options before giving up on your dream car.

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