How to avoid it<\/h5><\/li><\/ul>
Read over your application before submitting it to make sure there is no information missing and that there are no grammatical or spelling errors. Consider having someone else take a look at it too \u2014 they might notice mistakes you missed. An example spelling error: \u201cI owe <\/em>[with an \u201ce\u201d] $20,000 in securities\u201d<\/em> means the opposite of \u201cI own <\/em>[with an \u201cn\u201d] $20,000 in securities.\u201d<\/em> Carefully proofreading your application can ensure you don\u2019t make these kinds of simple mistakes.<\/p><\/div><\/article>
2. Credit score and credit history<\/h4>
In general, car loan providers tend to consider a credit score of 630 to be the minimum cutoff for approval \u2013 meaning any score lower than that could get you denied. Your credit score gives car loan lenders a strong indication of how likely you are to either repay or default on a car loan. Your score represents your credit history, which includes details like past bankruptcies, outstanding debts, overdue accounts and previous credit inquiries. A higher credit score means a lower risk for lenders.<\/p>
The length of your credit history also matters to car loan providers. So your car loan application could be denied if you\u2019ve only had credit in your name for short amount of time before applying.<\/p>
How to avoid it<\/h5><\/li><\/ul>
Check your credit score<\/a> before applying for a car loan to better understand how much of a risk you will seem to lenders. If your score is too low to qualify, consider taking steps to improve your credit first.<\/p><\/div><\/article>
3. Income and employment history<\/h4>
Your income and employment are two of the main factors lenders consider when reviewing your loan. If you\u2019re not earning enough, only just started a new job or have an unstable employment situation, you\u2019re more likely to be considered a high risk, so your car loan application could be denied.<\/p>
How to avoid it<\/h5><\/li><\/ul>
If income is an issue, applying for a used car loan<\/a> may give you a higher chance of success. If you\u2019re self-employed and can\u2019t provide all the relevant income documents, consider applying with a cosigner or providing supplemental documents like a financial record documented by a CPA (Chartered Public Accountant) or Notices of Assessment from the past couple of tax years. Freelancers might try getting a steady part-time gig on the books to show you have at least a reliable base income.<\/p><\/div><\/article>
4. Other loans or outstanding debt<\/h4>
In addition to your income, lenders like to take a look at your debt-to-income ratio (DTI). If you have a DTI higher than 43%, you may fond yourself with a denied car loan. You can use our DTI calculator<\/a> to make sure yours isn\u2019t over the line.<\/p>
How to avoid it<\/h5><\/li><\/ul>
Is your DTI over 43%? You might want to consider consolidating your debt<\/a> before applying for another loan. This involves combining several smaller debts into one large debt, simplifying payments and possibly getting a better interest rate in the process.<\/p><\/div><\/article>
Ready to apply? Compare your car loan options<\/a><\/p>
What happens if my car loan is denied after the purchase?<\/h3>
Unfortunately, some dealerships will allow you to purchase a car and drive off the lot even before your car loan has been fully approved. If they later find out that your car loan was denied, you could get a call from the dealership saying you either need to return the car or agree to pay a higher monthly payment in order to keep it. If you find yourself in this situation you may be the victim of \u201cyo-yo financing\u201d<\/a> (also known as spot delivery scam). In that case, the dealer might claim that it\u2019s already sold or traded in your car, or threaten it will call the police if you don\u2019t return the car immediately.<\/p>
If this happens to you, the first thing to do is keep your cool. It\u2019s easy to panic and rush into signing a loan contract with a much higher interest rate. That\u2019s what the dealership is hoping you\u2019ll do. Instead, you should carefully review any documents you received looking for words like \u201cconditional sale.\u201d If it the sale was conditional, you can essentially unwind the sale and return the car.<\/p>
You should also ask for a letter of denial from the financing company the dealer works with. If they can\u2019t provide one, then there\u2019s a good chance that they\u2019re up to something sketchy.<\/p>
How to respond to a car loan denial scam<\/h4>
Yo-yo scams are illegal. If you\u2019re a victim, report the dealership to your local police, the Canadian Anti-Fraud Centre (CAFC) and your province\u2019s auto dealer licensing body. You can also contact a lawyer to help get the situation resolved. Below is a list of provincial dealership licensing organizations you can contact:<\/p>
Province<\/th> Auto Sales Regulatory Body<\/th><\/tr><\/thead> Alberta<\/strong><\/td> Alberta Motor Vehicle Industry Council (AMVIC)<\/td><\/tr> British Columbia<\/strong><\/td> Vehicle Sales Authority (VSA)<\/td><\/tr> Manitoba<\/strong><\/td> Manitoba Motor Dealers Association (MMDA) \u2013 New Car Dealerships
Manitoba Used Car Dealers Associatin (MUCDA) \u2013 Used Car Dealerships<\/td><\/tr>New Brunswick<\/strong><\/td> Department of Public Safety \u2013 Motor Vehicle Branch<\/td><\/tr> Newfoundland & Labrador<\/strong><\/td> Government of Newfoundland and Labrador<\/td><\/tr> Nova Scotia<\/strong><\/td> Government of Nova Scotia<\/td><\/tr> Ontario<\/strong><\/td> Ontario Motor Vehicle Industry Council (OMVIC)<\/td><\/tr> Prince Edward Island<\/strong><\/td> Government of Prince Edward Island<\/td><\/tr> Quebec<\/strong><\/td> Soci\u00e9t\u00e9 de l\u2019assurance automobile du Qu\u00e9bec (SAAQ)<\/td><\/tr> Saskatchewan<\/strong><\/td> Financial and Consumer Affairs Authority of Saskatchewan (FCAA)<\/td><\/tr><\/tbody><\/table> How can I find out why my car loan was denied?<\/h3>
You can typically find out why your car loan application was denied by contacting your lender. If you applied online, you can often find out simply by logging into the account you used to submit your application. Otherwise, reach out over the phone to the customer service department of your lender to find out how to get this information.<\/p>
How do I avoid getting denied for a car loan again?<\/h3>
In order to avoid being denied for a car loan make sure you meet your lender\u2019s requirements before you apply. If your application is declined, ask the lender the reason. They can inform you of any weak points in your application that you might have missed, and you can take the appropriate steps to resolve these issues for next time.<\/p>
If there are any nonnegotiable eligibility requirements, such as a minimum income threshold or specific documentation that needs to be submitted, it\u2019s important that you meet these requirements. Otherwise, you\u2019re pretty much guaranteeing a rejection.<\/p>
- Check the credit requirements. <\/b>Car loan lenders will sometimes require that you have good credit, which usually means having no negative listings on your file. Check your credit report before applying and make sure it meets the lender\u2019s criteria.<\/li>
- Check the income and employment requirements.<\/b> If you\u2019re unable to meet one lender\u2019s specific income or employment requirements, find a different car loan provider that isn\u2019t as strict.<\/li>
- Pay off any outstanding loans.<\/b> It\u2019s a good idea to pay off your debts before taking on more. You\u2019re more likely to have a loan approved if you can prove that you\u2019re able to repay the money you borrow in a timely manner.<\/li><\/ul>
Ready to apply? Car loan options to consider<\/h3>
\n\n <\/div>\n\n\n - Check the income and employment requirements.<\/b> If you\u2019re unable to meet one lender\u2019s specific income or employment requirements, find a different car loan provider that isn\u2019t as strict.<\/li>
- Check the credit requirements. <\/b>Car loan lenders will sometimes require that you have good credit, which usually means having no negative listings on your file. Check your credit report before applying and make sure it meets the lender\u2019s criteria.<\/li>