6 Reasons Why Your Auto Loan Was Denied and What You Can Do About It.

Getting turned down for a car loan can be stressful, especially if you need a car to get to work. Getting a car loan denial for auto financing can really take a toll if your credit is suffering, but take heart – here are some tips from JJ Best Banc & Company that could help you secure an approved car loan.

Common Reason for Auto Loan Denied

Car loan denial shouldn't ruin your hopes of financing a vehicle. From our view point at JJ Best, it should help you see what areas you need to focus on before applying again.

Here are six common reasons that your car loan denial occurred. We process a lot of paperwork at JJ Best in getting a car loan, and the initial application asks for a lot of information. Illegible answers, incomplete information, or – worse – purposely providing incorrect information could all lead to the lender rejecting your loan request. Double (and triple) check your information on your application before submitting it. Also, make sure that you have all the required documentation ready to go with your application. Of course, JJ Best will review your information and help you with areas that are incomplete for us to process your application. But, it’s good for you to do as much as you can so there are little delays in getting your approval.

1. Unstable or insufficient income – If you can't prove how much you make or your source of income, an approval isn’t likely. Lenders want to be certain you can afford your payments. It won't matter how good your credit score is if they're not sure of your income.
2. Habitually poor credit history – If your credit reports show you continually pay your bills late, make partial payments, and/or show a number of unpaid bills in your past, you may get denied, especially if you have a poor credit score. Learn how to improve it here.
3. No credit history – Having no credit history can also spell disaster for your loan, especially if you're working with traditional automotive dealers and lenders. “This is more the case with the teen to 20 year old’s who haven’t worked for a solid period of time—so build your work history as much as possible so you won’t be denied”, says Sean, Loan Officer at J.J. Best Banc.
4. Too much debt – Lenders compare your current debt, including the potential loan and auto insurance payments, to your current income amount using a calculation called a debt to income (DTI) ratio. They total all your monthly bills and divide it by your gross (pre-tax) monthly income. If the outcome is 50 percent or more, lenders are likely to deny your loan.
5. Taking on too much debt too fast – If you decide to take on a lot of new debt all at once this may result in a car loan denial – such as multiple lines of credit, big-ticket items, or a mortgage – and then you apply for an auto loan, you're in for a surprise. “While having a diverse credit profile is good, taking on all this credit at once can actually be a red flag”, says Chris, Loan Officer at J.J. Best Banc.
6. Asking for too much car – If you try to finance a vehicle outside your price range, even if you're sure you can afford it with a low enough payment, you may end up with a car loan denial. Stretching your loan to the max (84 or even 96 months) just to afford the monthly payment may not be worth it, and you might be asking for more car than you can afford. "Remember, the longer the loan term, the more money you end up paying in interest charges’, says Ryan, Loan Officer at J.J. Best Banc. “Additionally, a lot can happen in eight years – do you really want to pay on a loan for that long?”

What Can You Do If You're Loan is Turned Down?

There are a few things you can do to help ensure you don't get a car loan denial for a car loan you would've otherwise gotten approved for. Here are some tips from J.J. Best Banc:

• Always know your FICO credit score, and what's on your credit reports. J.J .Best Banc recommends our applicants to get their credit reports from each of the three national credit bureaus by going to www. AnnualCreditReport.com. You may get a copy from each credit bureau every 12 months. It’s important to see what lenders see when they look at your credit profile, and you can fix any errors on your credit reports before you apply while also researching things like average interest rates.
• Make sure all your documents are in order. Before you apply for an auto loan get digital copies of your most recent pay check stubs. Be sure these include your year-to-date income. Also, gather documents that prove your residency – typically, a current utility bill in your name, at the address on the application. Proof of a working landline or cell phone in your name is often a requirement, along with a list of personal references.
• Prepare a budget. YYou can calculate your DTI yourself to see if you're below the lender's maximum. Simply add all of your monthly bills together and divide that number by your pre-tax monthly income. The resulting number is the percentage of your income that already goes toward monthly bills (lenders want your DTI, including a car and insurance payment, below 50 percent). Another calculation you can do is your payment to income (PTI) ratio. Lenders typically want a maximum monthly car payment of between 15 and 20 percent of your monthly income. To find your payment range, multiply your gross monthly income by the target percentage – by 0.15 to get your low end and 0.20 to get your high end. This gives you an affordable target range for your monthly payment. More importantly, be realistic about finding a vehicle that meets your needs and has some of the features you want, but isn't going to break the bank.
• Build and improve your credit. It’s the simple things that matter most regarding a car loan denial. If you're without a credit history, a great way to establish one is with a secured credit card. These types of cards require you to make a deposit, which then becomes your credit limit. After that, you use and make monthly payments like a normal credit card, which can help you quickly build credit. Al Maranda, Finance Director at J.J. Best Banc says, “One of the best ways to improve your credit, however, is to make sure to pay all your bills on time. This goes a long way toward establishing a positive credit history. Credit history is the largest factor in determining your FICO credit score, which is the score most commonly used by lenders to judge creditworthiness.”

Ready to Apply for a Car Loan?—Apply online at JJBEST.com or call your personal Loan Officer at 800-USA-1965. We look forward to servicing you.