If the only thing standing between you and your dream car is your lender’s approval for a car loan, getting rejected can be extremely frustrating. However, if you don’t have a clear route to paying off your debts within five years, you may want to consider a few debt relief options. Before you while away in self-pity after being denied a car loan, it’s best to schedule a bankruptcy credit counseling session with a certified professional.
Things You Should Do After Your Car Loan Rejection
Determine Why Your Car Loan Application Was Rejected
You have to know why your bank or lender decided to reject your car loan application. The most common reasons behind car loan rejections include incorrect information, insufficient income, bad credit history, and multiple loan applications. Once you’ve figured out the primary reason you got rejected, be sure to address it immediately.
However, if you can’t determine the reason on your own, the Equal Credit Opportunity Act gives you the right to ask your lender why they rejected your application. However, be sure to request an explanation within 60 days.
Decrease the Loan Amount
If the lender isn’t willing to approve the loan amount you’ve requested, try reducing the overall vehicle cost. Applying your extra savings to your down payment can lower the total amount financed. Another way to bring the loan amount to an acceptable level is to choose a less expensive vehicle.
Ask Someone to Become a Cosigner
Consider adding a cosigner to your re-application. If your cosigner’s financials and credit history are acceptable to the bank or lender, they may approve your car loan. However, it’s important to note that your cosigner understands the risk that comes along with it.
For instance, they may have to pay back your loans for you if you’re not able to do so. Moreover, they may also get a negative mark on their credit report if you get a negative mark on yours due to a late payment.
If you have bad credit, providing collateral or something of value may improve your chances of qualifying for a loan. It’s possible to use your car as collateral for your loan because it allows the lender to seize your vehicle if you fail to make payments.
Increase Your Income
Increasing your income is one of the best ways to improve your overall financial situation. Although the process of getting a promotion or finding a new higher-paying job may take some time, an increase in your income may make your lender feel comfortable about approving your car loan.
Other ways to get yourself the income boost you need are side gigs such as grocery and food delivery, ride-sharing, or freelancing. They may approve your re-application when the lender sees that you have consistent and provable income.
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