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There are many reasons for taking out a loan for a car. Similarly there are reasons for loan rejections. If you are applying for a car loan then this article is for you. Before you submit your documents to the bank use this checklist to ensure car loan approval. After analyzing multiple reasons for car loan rejection, I found some most common one. Some of them you can fix easily. Some of them take time due to financial or non-financial reasons. These car loan rejection reasons will work as an eye opener. You can save yourself from one more rejection if you fall under any of these categories.

Top 6 Reasons for car loan rejection

Auto loans are secured loans but still some people get auto loan rejections. All financial institutions function by giving various kinds of loans. Therefore, the objective is to approve a loan instead of rejecting it. Still, banks reject car loans due to many reasons. These are common reasons for a car loan rejection and most of them you can fix. You can also use a few points for small business loan rejection also. Check out the list below for more information.

1 – Low Credit Score

As soon as you put in your application for a car loan approval, the bank checks your credit score. If you have a poor credit history then the overall credit score will be low. Therefore, the bank has solid reasons to reject the car loan. This is one of the most common reasons for auto loan rejections. I recommend there is no point getting a rejection again. You should know how to improve credit score before applying for a car loan.

2 – Poor Payment History

If you loan on your name, banks want to know how regular you are with payments. If you make all the payments on time then the approval is fast. But if the payments are not consistent, they avoid giving loans. Even if you pay the entire loan, making payments on time is important. Due to this, it works as your second reason for an auto loan rejection.

3 – EMI Limit is also among primary reasons for car loan rejection

In many countries, there is a limit on the maximum amount you can pay back in EMIs. Therefore, I recommend you to use an auto loan calculator to check EMI amount. Add this amount to your existing EMI to know if you can afford it. If your Existing EMIs already reach the limit, your loan will surely get rejected.

4 – Unpaid Dues in the Credit Report

If you have some unpaid dues in your credit report, banks believe that you are a defaulter. No bank will give approval for a loan because of unpaid dues. There are two types of unpaid dues that become reasons for loan rejections. First is the Write-off amount and other is the fee on credit cards that you are not using. For example, you are using a credit card and you believe it is paid off. Banks charge a small amount of fee on it. If you are not alert about your finances, the amount will keep on growing. You will only come to know about it at the time of loan application.
Therefore, you should be always alert about your credit cards and loans. Always take a No Dues Certificate from the bank at the time of loan closure. Otherwise, this will become one of the reasons for car loan rejection.

5 – Unstable Salary

You may be earning a good amount every month but banks want regular income. They prefer to give loans to people with regular income. For example, you are doing business. At one point you earn $10,000 a month and at some time you do not even make $3000. This is a symbol of irregular income. If you are running a business, try to focus on getting regular income. Even if you are making a million dollars per month. Do not transfer the entire amount to your savings bank account. Shift to a regular salary coming from the business model.

This will help you show that irrespective of the ups and downs in business, you are making a regular income per month. Many Bloggers, YouTuber and content creators also face this challenge. It takes time to change fortune but at least you can minimize the reasons for car loan rejection. If you follow this technique you can easily get the auto loan approved.

6 – Recent Loan Default can become Reason for Auto Loan Rejection

Banks are very cautious about your recent loan defaults. If you have a loan default on your credit report, banks take it very seriously. Normally, executives recommend you to take care of loan defaults before applying for a fresh loan.

These are only a few car loan rejection reasons and the list can grow in real time. Due to this, you should check every detail in the auto loan application form. Make sure there are no typing mistakes and information is correct. Especially re-check your income related documents.

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