A few days after applying for a used car loan, Rakesh was in for a rude shock. His application for the second-hand car loan had been rejected. On further investigation, he was informed that he did not meet all the eligibility criteria and hence the rejection.
Rakesh is not the exception to the rule. Many loan applicants face similar rejection while applying for a loan. If you have suffered a similar fate or are planning to submit an air-tight loan application for a used car loan, here is a list of 4 common reasons why secondhand car loan applications are rejected.
- Incorrect Information
The information you provide to the used car loan provider is extremely vital. All the information will be used by lenders to assess your creditworthiness. For example, the address and phone number you have provided will be checked for validity. If a small mistake happens, even unknowingly, the second-hand loan application can be cancelled.
Solution – Go through your loan application forms carefully. Verify every detail. Make sure everything is 100% correct. Confident?
- Lack of a stable income
Used car loans are disbursed based on many factors. One of the important parameters is borrower’s ability to repay. Stable income is a good indicator of repayment ability. Lack of a stable job or a new job may be a negative. Self-employed people are also allowed to take second-hand car loans if they have a running business, amongst other norms. You can be salaried or self-employed, but do not forget to check the used car loan eligibility norms.
Solution – It is important to know the eligibility norms before applying. So, give them a read and arrange documents to support your used car loan eligibility. If you have less than two years’ work experience with a minimum of 6 months with current employer, wait before applying.
- Poor credit record
If you already availed too many loans, your used car loan eligibility may be impacted. Too much debt is a consideration when a lender investigates a potential borrower like you. If you have signs of poor management of current debt, your used car loan application can be rejected straightaway. It is important to understand before you ask for a new loan, whether you can service the existing loan. If it is difficult, do not immediately buy the second-hand car. Wait for a few months to let the situation improve.
Solution – It is important not to take too much debt. If you have too much of it already, there is no quick fix. You must build a track record of timely repayments and a clean slate to impress second car loan lenders.
- Large loan request
There is a limit to how much you can borrow based on your income. If you ask for more loan than you can manage, the financial institution can reject your used car loan application. Tata Capital provides second car loan for amounts up to Rs 50 lakh.
Solution – Take funds according to your current income situation. Just because you are getting a Mercedes or Audi at throwaway price compared to a new car does not mean you will get the loan. If you are confused, speak with experts to fine-tune your requirements and help you get closer to your dream car. There may be flexible EMI options that can help you.