Applying for car finance when you know your situation isn’t the best can be stressful. And when you get the call to say your application has been declined, you may be wondering what to do next. There are plenty of reasons for lenders to refuse your application and we know it can be pretty devastating.
It can be because your credit score is too low and you are aware of the situation, or you may find your financial history is working against you. However, there are ways for you to bounce back from a rejected application. So let’s look into why you were rejected for a car loan or finance in the first place. Here are a few possible reasons:
Bad Credit History
Sometimes, keeping up with your bills can be tough. A lay off from work or sudden change in your income can make it hard to pay for your credit cards and other bills. When you let your bills accumulate over time and are late in paying more than a couple of times, your credit score can suffer greatly.
If the debt is equal to or more than $150 and is more than 60 days overdue, a default will be listed on your credit file, and it will stay there for the next five years. Lenders have access to your credit history, and if they see that you have had difficulties paying bills or loans in the past, they will see you as a high risk and opt to reject your application. There are a number of online services that can provide you with your current credit score, like creditsimple.com.au.
Credit Application Overload
When you are in a tight situation, you may find yourself in a cycle of applying for multiple credit products over a very short time frame – especially if you are getting declined. This activity can been seen as credit stress and reflect poorly on your position.
To ensure that you can pay them back, lenders conduct affordability assessments. The assessment will tell them if you will be able to afford the loan repayments. This involves looking at your regular income deposits into your bank account and the expenses you incur.
If a lender does not think that your income is enough to cover your current bills, lifestyle and the loan repayments, they will say no to your application. It’s their way of protecting you from a commitment that you may struggle to keep. Alpha Car Finance, with our Australian Credit Licence (411447), ensures customers that we are committed to a code of practice of responsible and ethical lending.
In line with your income, lenders will also want to look at your employment history. If you are unemployed, have a contractual job, or just started your current one less than three months ago, they may not be inclined to approve your loan application.
Take for example freelancers. Once their current project is over, they need to find a new one, and there will be a period between projects wherein they will not have a job. If you were approved for the loan, and you don’t make the repayments on time, it can spell trouble.
One way to get around this could be to work with a secondary applicant - often a parent, a child or a spouse. As co-borrowers, their discretionary income will add significantly to the lending equation and get you over the line.
No Demonstrated Savings
Aside from your employment status and income, another factor is your savings account. If lenders see that you can make regular deposits into your account, no matter how small, then that is an indication that you can put away a set amount. To them, if you can put a fixed amount aside regularly, then you are capable of making payments.
What’s more, having accumulated savings in your account also tells them that there is a way for you to make the repayments for the loan if you are approved. So remember, when you are supplying supporting documents, like bank statements - include other accounts where you may have small amounts of accumulated savings.
There is a lot of talk these days about “payday” loans - short term loans that can help get consumers from one pay cheque to another, but if not paid off in time can incur massive interest rates that will set you back even further. These loans will appear on your credit file, and a history of multiple payday loans with a number still live, will affect a lenders decision.
If you are reliant on short-term borrowing on a regular basis, lenders like Alpha Car Finance may decide that it would not be responsible to accept you for a long-term financial commitment.
When you have been declined you can reapply after 90 days; your best chance at that time will be to ensure those payday loans are all paid, and you have managed your personal finances without having to take out any new ones.
The Solution: Alpha Advantage
While we may not have been able to provide you with car finance at this point in time, we can provide you with a car, SUV or ute today. Alpha Advantage provides customers with access to our extensive fleet through both finance (or lease) options and through long-term car hire.
We can put you into a late model hire vehicle at a weekly rate that is at least 40% cheaper than the standard daily rate.
And our long-term contract arrangements mean that if you do stay on top of the weekly commitments and your account is always paid in full on time for at least 13 weeks in succession, we can reassess you for car finance. All you need to do is provide an updated application form - and make sure you are on top of your daily, weekly, monthly living expenses.
Drive Away Today
If you have $490 (which includes the first week’s hire cost) to pay the upfront costs today, and the capacity to stay on top of the weekly charges. Simply call us on 1300 22 74 73 or drop by your local Alpha Car Hire branch. It’s never been easier to get a car. So, if you have bad credit and need a car now, talk to us, and we can help you get started.