Did you know that car loans make up a huge majority of the funds borrowed from banks by Indians? These days, with so many banks and other NBFCs offering the facility to apply for a car loan online, it’s easier than ever before to buy your dream car.
While the odds of your auto loan application getting rejected are minimal, nevertheless there are chances for it to happen. It’s a common practice for lenders to scrutinize all the information you have provided and to take an in-depth look at your entire credit history. The loan approval depends on several factors that they uncover.
Let’s take a look at the reasons why your loan on a car can end up getting rejected.
Incorrect / Missing Information
The information you provide to your lender when filling up the form is highly important. All of it is used by your lender to decide whether you’re capable of paying back the loan or not. For instance, your address and phone number will be physically verified. Even the smallest of mistakes could lead to your loan approval getting rejected.
How to avoid it: Make sure to double check the forms to ensure that all the information you have provided is 100% correct.
No Stable Income
The topmost priority of a lender during the investigation process is to figure out if you can pay back the loan on time or not. Lack of a job or frequent job changes all can destroy the chances of getting your loan approved.
How to avoid it: Don’t apply for a brand new car loan within months of joining your new job. Try to establish credibility by improving your prospects at work before you apply for a loan.
Poor Credit History
This is another major factor that determines the outcome of your car loan process. A poor credit history signals to the lender that you have issues paying back the loan on time and make them reluctant to offer you a loan.
How to avoid it: Try to establish your creditworthiness before applying for the loan. Pay off all your pending bills to improve your credit score.
A mismatch between your Loan Amount and your Income
If the answer to the question, “How much money do you require for your car loan?” is “As much as the bank can give,” then it’s time to hold your horses. Banks have a limit to the amount an individual can borrow based on his/her income. So, if the loan amount you’re requesting is exorbitant, then you can be sure that it’ll be rejected.
How to avoid it: Don’t select a model that doesn’t fit within your budget. Consider the amount you can shell out as EMI every month. Make use of an online car loan calculator to help you with this.
Practicing Fraudulent Activities
There is a difference between providing an erroneous information and false data. Never engage in fraudulent activities just for the sake of increasing your chances. If found out, you could not only end up losing your low-interest car loan, but also your credit history becomes tarnished.
Final Thoughts
The very idea of driving your own car is enchanting. Make sure you get it right by following the guidelines mentioned above when you apply for a car loan.