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Bank Car loans | What to do when the banks say no

Chris Hopkins
Sep 13, 2021 12:39:13 PM

Have you ever had a car loan application refused? There's nothing more frustrating than scouting the car yards and online market places to find the perfect car, then connecting with the seller to negotiate the perfect price, only to have the bank reject your finance application. Already deflated, you've now got the embarrassing task of informing the waiting seller or dealer that your finance has fall through. The whole experience can leave you feeling anxious and stressed. 

Unfortunately for many Australian's this scenario is real. Luckily rejection from the bank doesn't mean that you can't get a car loan. It simply means that one lender, in this case your bank, didn't want to give you the finance.  Don't worry there are lenders for all credit profiles. Your profile just didn't fit the bank's lending criteria, but it may fit that of many other lenders. let me explain.

When it comes to car loans there are different lenders to meet the needs of different credit profiles, prime lenders, and sub-prime lenders. 

What is a prime auto lender?

Prime auto lenders are traditionally the big banks. A prime auto loan sometimes referred to as a bank car loan, is a type of loan used to finance a car purchase that’s offered to people with high credit scores and excellent credit histories.

What is a Sub- Prime auto lender?

A subprime auto lender offers car financing solutions to people with lower credit scores or limited credit histories. Subprime loans carry higher interest rates than comparable prime loans but are easier to qualify. 

How do lenders determine your car finance eligibility and rate? 

car loan rates

Lenders use risk-based pricing to determine if you qualify for their car loan products, set your personal loan rate and terms.  Here's a simple explanation of how lenders work.

When you submit your loan application to a lender the first thing they do is assess your creditworthiness to determine how much risk you present to them as the lender. While every lender has slightly different loan qualification requirements basically they assess factors including your credit score, credit history, and debt to income ratio to determine your capacity to service the loan and how much risk you present as a borrower.

If you have a checkered credit history with negative events such as payday loans, bill defaults, and missed payments or are new to credit, lenders may consider you a higher risk, dropping you into the sub-prime category.  

Conversely, if you have a great credit history and high credit score which clearly demonstrated capacity to service the loan lenders will consider you low risk, tag you as a prime customer and offer you better rates.  

Why your car loan application was rejected by the bank

car loan refusal

While there are many possible reasons why your car loan  application was refused by the bank, the short answer to this question is simple. Banks are prime lenders and while they often advertise the best loan rates, they often have the strictest lending criteria, making qualification for the banks best rate car finance difficult. 

What not to do when your car loan is declined by the bank

If you've been rejected by the banks it doesn't mean that you cant get the finance you need. The big banks only make up a small proportion of car finance lenders in Australia If you have been refused you still have at least 30+ other lender options.  The challenge is knowing which alternative lender to submit your car loan application to. 

The big mistake that many people make when thy are refused finance from the bank is to panic and start submitting loan applications to multiple lenders. It's understandable that getting finance approval is a priority as the car seller won't hold the vehicle indefinitely, but be warned, submitting to multiple lenders is the fastest way to damage your credit score and reduce your probability of success. So what's the solution?

What is the best way to get your car finance when you are refused by the banks?

The smartest way to secure the best car finance option for your needs and circumstances is to use a car loan aggregator. like Ausloans. 

Ausloans is Australia's largest independent and most trusted car finance broker. We work for you not the banks and with direct access to over 40 specialist car finance lenders, can not only save you the lender runaround, but also help you protect your credit rating. 

At Ausloans we use our proprietary finance and lender software, Zink, to analyze your credit history and deliver to you, only lenders who are prepared to accept your loan.  The whole process takes as little as 10 minutes, does not impact your credit score and starts with our simple, paperless online application form. 

Need an answer on your car finance today? Click the banner below to apply online now.

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