Car loan has made it possible for many to buy a car. Though many can furnish all the necessary details and see the process to a fruitful end, many face unnecessary hassles in the form of loan application rejection. Especially, if you happen to be one who is not much aware of banking jargon and formalities, it can get a bit intimidating going through the whole process.
As we noticed by the end of 2019 and learned from Economic Times that lenders had tightened the car loan norms, which increases the rejection rate for new vehicle financing by 15%-20% in comparison to 3%-4% during normal times. Loan application rejection is a very common scenario. Something as simple as defaulting on your credit card payments can impact your chances of securing a loan. However, with simple considerations and a keen eye on the fine details, you can get a loan sanctioned without much trouble.
So, the question arises, why is the loan application of many still gets rejected?
Reasons for loan rejection
A loan can be rejected for an array of reasons. However, first & foremost is to make sure that you are not guilty of committing these silly mistakes.
- Improper details or documentation
- Wrong Address
- Not having house ownership
- A mismatch between gross and net salary/mismatch between your income and loan amount
- Simultaneous ongoing loans: It is better to pay off the ongoing loans than to opt simultaneously for different loans.
These are somewhat minor hassles that tend to be missed out by the applicants. It is at the time of filing forms for the loans that in a hurry, you put wrong information. It is advisable to keep all the information handy as you about to apply for car loan.
How to avoid loan rejection?
The credit score is the single most important aspect which you need to be aware of before you go out to apply for a loan. Financial institutions have to have some sort of guarantee to determine your eligibility. For them, it is your credit score based on which they offer car loan interest rates and if they are even going to let you avail loan.
What determines my credit score? Your credit score is determined by your banking history, employment, and your ability, in past, to pay off loans at right time without defaulting on the payments. The higher the credit score, the better are the loan features, and chances of loan application rejection are almost made negligible.
Here is how you can make sure that you have a higher credit score:
- Never default on loan repayment. One way to ensure that is to check for repayment plans which include grace periods and other features that help you pay off without getting ticked off.
- Regularly monitor your credit history. This way you can be sure that your credit score is being properly maintained.
- Efficiently manage your credit utilization and make sure you do not apply for credit cautiously and judiciously.
- Use the EMI calculator beforehand to make sure that the EMI plans are well within your convenience.
- Do not forget to monitor your joint account liabilities. Make sure that any joint account you have with your parents or a spouse is not defaulting on any payments.
The good news is that you can put all your concerns regarding car loan eligibility at rest. Droom brings to you Droom Credit. Based on 21st-century Machine learning, an algorithmic system determines your credit score to lend you a loan within 10 seconds. No need for carrying documents and fretting over details. Fill-up the necessary information online from anywhere and you will have all the information readily available for you to avail. Every part of the car-buying journey along with the loan process is made readily available.