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Your Next Steps After Lenders Reject Car Finance Application

Anna Johnson

Car finance is a secure debt since the lenders have collateral to protect their investment. Still, lenders may refuse to approve your application because of your ineligible credit profile. There are specific guidelines financial institutions need to follow for a safe lending environment.

These guidelines ensure the lenders don’t overwhelm the applicant with debts only to make more money. For borrowers, the application rejection will undoubtedly come as a disappointment. However, owning your vehicle is not an end of the road if you know the proper steps ahead.

Find the Reason for Application Rejection

Start with finding the reason for your application rejection from the finance provider. Credit score and unaffordability are the most common reason for car finance rejection. However, it could have been a mistake on your application form or its processing.

Ask the lender’s representative to explain the reason and suggest some measures to change its status. Sometimes, the documents don’t give a clear picture of the situation and affordability of an applicant. Some other reasons include high income to debt ratio, low down payment, and low available funds for your profile.

Improve Your Profile

The credit profile doesn’t improve overnight because the positive measures will take time to reflect the result. You need to work on the reason to make sure the lenders find your profile worthy of trust. The following are some measures that may help improve your profile for car finance.

Increase Down Payment

Down payment will reduce the risk for banks with smaller loan amounts to approve. It will increase your equity over the vehicle to get better offers if you ever consider refinancing. For your current loan, you will look responsible because of saving a good amount of money.

A significant down payment always looks good in the finance application. You should start saving money with some substantial changes to your lifestyle. Also, you can take a bridge loan or contact a lender with zero down payment requirement to get the approval fast.

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Pay the Existing Debts

Your existing debts will reduce the affordability for another liability such as car finance. No lenders want to go through the process of repossession because of the additional cost. Therefore, the existing amount of debt will force them to reject the application.

You should start with enlisting the debts with every detail, such as instalments, interest rate, loan amount, and the repayment period. Now, prioritise the debts based on the loan amount or interest rate to pay them early. You can take a debt consolidation loan to get lower interest rates and make the repayment easy.

Find a Co-signer

You can compensate for the reasons for the rejection of your loan application with a co-signer for car finance. They will share the responsibility to repay the loan to the lender. Thus, your payment defaults will make them liable for the instalments.

People often avoid a co-signer even the borrowers offer a lower interest rate. They don’t want to risk their relationship because a financial problem in future may not allow them to pay the instalments. Moreover, it is never easy to find someone with a good profile to share the risk.


You don’t have to buy the higher model of your favourite car only to get a few needless features. The price gap between the basic and top models of the same car is huge. Thus, stick to your needs and downgrade your choice of vehicle to lower the loan amount.

Increase Affordability

You can improve your affordability for a loan by repaying the existing debts. We have already covered the part in the above point. Another way to increase the affordability is additional income to pay the instalments.

Start a side hustle outside the office hours to make money from the eCommerce sites. You can also ask for a raise or look for opportunities elsewhere for an increase in your paycheque. Freelancing is also a great option to make good money by serving the clients with your creative or technical skills.

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Become a Responsible Borrower

While financial experts will recommend not to take another loan if your score is already down. Some will suggest the opposite to help you improve your credit score. Take a small debt and make payments on time to improve your credit profile.

You can also use your credit card for payments instead of cash. Though you must pay the bills on time otherwise the entire process will lose its purpose. The timely payments will reflect positively on your profile to increase the chances of approval.

Contact a Direct Lender

We are aware of the stringent processes of banks to find the ideal profiles for their financial services. The finance section of the dealership may approve the loan, but their interest rates are often intimidating. Here, direct lenders may seem like an ideal option to apply for guaranteed car finance for bad credit.

Direct lenders offer to personalise the solution to your requirements, considering your profile. Some of them will only conduct a soft enquiry to check the essential details from your profile. Soft enquiries will not reflect on your credit history to further damage it.

Alternatives of Owning a Vehicle

People are moving from car ownership to more practical solutions for their requirements. A car parked in your garage will remain the most reliable option from the list below. However, these options will not require car finance to make your financial condition struggle.


Leasing is the ideal alternative to get a car without ownership. You will pay rent instead of instalments to the lessor. And you will receive possession of the car for the entire period.

The upgrades are more accessible with a lease with a simple application and a rent increase. However, you will not gain ownership even after paying a significant sum for the next few years. The control over the upgrades and addons is limited and require permission.

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Car Pool

A carpool is an environmentally friendly alternative to buying a vehicle. You will share the fuel cost with the owner of the vehicle. Therefore, the scope of savings over the repairs, maintenance, and tickets is immense.

Multiple applications are available on your smartphone to find other riders with the same route. However, the availability of rides will become a problem during the odd hours. You will not have the freedom to use the vehicle for personal purposes at any time.

Bicycle to Work

The main reason to own a vehicle is to commute to work and market places. You can manage both tasks with a bicycle instead of a car. The essential requirement is a house near the amenities and office to make the travel possible.

It may seem like an unreasonable alternative, but there are multiple benefits of cycling. You will save money on the car purchase, fuel, and maintenance. At the same time, the health benefits will become evident after a few weeks of long-distance cycling.


To sum up, you should improve your profile to get the finance approval with a detailed plan. It will take some time for the above methods to accomplish the ultimate objective. Or, you can try the alternatives if you don’t mind abandoning the idea of owning a car.

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