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5 Reasons Your Car Loan Application Was Rejected
Posted on Thursday, July 1st, 2021 | By IndusInd Bank
Do you wish to buy a new vehicle but have been denied a car loan? Don’t feel disheartened! Read about these 5 possible rejection reasons to figure out the mistakes you could have avoided.
Top 5 Reasons Why Your Car Loan Application Was Rejected
Remember, you can apply for car loan quickly after rectifying the following gaps in your application.
1. Unhealthy Credit Score
Maintaining an unhealthy credit or CIBIL score is one of the primary reasons behind that rejection letter. Your CIBIL score informs the lender about your creditworthiness. Banks work on the basic principle that higher the borrower’s CIBIL score, lower their chances of defaulting on EMIs.
Naturally, the opposite is also true. So, if your CIBIL score is below 600, the chances of car loan approval go down. A credit score that lies between 600 and 750 might get you an auto loan but at a slightly higher interest rate. However, a credit rating above 750 is considered excellent, and a borrower with such a score will almost certainly get a car loan at attractive interest rates.
Therefore, before applying for car loan, check your credit score.
How to Improve Your Credit Score?
Improve your credit score by repaying all your dues on time. Defaulting your credit card payments and other EMIs can negatively impact your CIBIL rating. Also, make sure you don’t make multiple loan enquiries or apply for finance with several lenders at the same time.
2. Economic Instability or Inadequate Income
A lender assesses how much loan amount you can avail and repay by going through your monthly income and employment stability. It often happens that a lender rejects a borrower’s application just because the loan amount is higher than repayment capacity of the borrower.
How to Counter the Problem?
Ensure stable income with a credible employer. If you are self-employed or are a freelancer, show documents like IT Returns, balance sheets, etc. that proves you have a stable income. Lastly, don’t borrow more than what you can afford.
3. Incomplete Paperwork
Even though certain banks these days have relaxed their car loan eligibility criteria and documentation requirements, you must compile them to improve your approval chances. Hence, talk to your lender and make a checklist of all the documents you need.
How to Ensure Complete Paperwork?
Incomplete or incorrect paperwork is also one of the reasons of your car loan getting rejected. It is advisable to take help from friends or family members, who have recently taken a car loan, when completing the paper work. In addition, check the bank’s website to make sure that you have a clear idea about the documents that you need to share for the loan approval process.
4. Parallel Loans
A car loan generally runs in lakhs, which is why you should refrain from applying for parallel high-value finance along with it.
How to Counter this problem?
Consolidate your debt and pay off before you apply for car loan. Therefore, you can take calculated risks and plan for a better future.
5. Credit Card Utilisation Ratio
A high credit card utilisation ratio can negatively affect your approval chances and credit score. Maxing out your credit limit when you are not applying for a car loan is not a problem. But, if you plan to avail auto finance, make sure you maintain a healthy credit card utilisation ratio a few months before applying for the loan.
How to Ensure a Low Credit Card Utilisation Ratio?
Draw up a budget to avoid unnecessary expenses, request a higher credit limit and ensure timely repayments.
Looking for an Affordable Car Loan?
If yes, then your search ends at IndusInd Bank. Apply for car loan at attractive interest rates and flexible repayment tenure with minimal paperwork.
So, don’t wait any longer! Get in touch with us to finance your dream car today!
Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.
