Can I Appeal a Car Finance Decision?

Your eyes have been set on that amazing new car you’ve been wanting for a while. You’re only a few steps away from getting it and… Boom, your car finance provider has refused your loan application. 😱 The dream shatters, you can hear the pieces of your picture-perfect vehicle falling to the ground… Ah, what a nightmare. We feel you, we get it. But don’t lose all hope just yet! There are options. Let’s discuss how you can appeal a car loan decision. 🤗

Why Was My Car Finance Application Rejected? 

Car finance applications can be rejected for a myriad of reasons. Let’s go through the most common ones. 

You Can’t Prove Your Affordability For a Loan

One of the most common reasons for being refused a car loan is surrounding applicants’ affordability. Car finance providers will not only want to assess whether or not you’re a responsible loan applicant, but they’ll also want to check if you can comfortably afford the monthly repayments. If they don’t think you can, that can be reason enough to reject your application. Bear in mind that car finance providers have to behave responsibliy towards potential lender.

You Have a Poor Credit Score

Another really common reason for car loan applications being rejected is a poor credit score. This is especially true if you have received any County Court Judgements (CCJ’s) or have ever missed any type of credit repayments - in fact, missed repayments will stay on your credit report for three years. CCJ’s or any kind of bankruptcy will stay for six years at a minimum. Seems tough, doesn’t it? Well, don’t worry there’s plenty you can do to work on your credit score, but we'll get to that a bit later on. 

You’ve Applied For Too Many Loans

Most people don’t know this, but funnily enough, every time a finance provider performs a hard credit check for you, they will leave a record of this on your credit score. If you apply for too many loans, it will leave a bad impression of you on lenders, as they will think you’re not very good at managing your money. It seems a bit absurd, but it’s a really important rule to follow. 

Don’t be tempted to apply to loads of loans to get the best rate, only send out an application to one finance provider once you’ve finished doing your research. A quick tip: you can apply for decisions in principle, which will let you get an idea of each lender’s interest rates without leaving a footprint on your credit score. 

Your Lender Doesn’t Cater For Your Employment Status

Depending on your employment status, you may have to go to a specialised lender. If you’re unemployed, work part-time, or are self-employed, you should look for finance providers that offer those types of loans. Do make sure you gather enough documents to prove your income though, like bank statements and address history for example. If you want to learn more about what documents you need to apply for car finance, here’s a blog post about it

You Don’t Have a Full Driving Licence 

Most lenders will only provide car loans to applicants who have full driving licences, unfortunately. You may find some who will let you place a joint application or have a guarantor, but it’s best practice to wait until you have a full driving licence, so you’re not risking the rejection of your application. Also, you’ll get a much better interest rate! Remember, the riskier you seem to lenders, the more they’ll charge you for the loan. 

You Don’t Have Any History of Borrowing

It would seem logical that never having taken out a loan would be beneficial to an applicant. Surprisingly though, it is not. You could get declined a car loan if you haven’t ever had finance before. That’s because it’s considered more of a risk for lenders to give you a loan when you haven’t proven that you’re capable of paying loans back. To counter this, you can take out micro-loans or get a credit building credit card.  

You’re Too Young For Car Finance

This can be a really annoying reason, but you could be too young for car finance. Age is a really important factor in being granted car finance. Unfortunately, you won’t be able to get a car loan if you’re under 18, even though you can drive at 17 in the UK. If you’re desperate for a car loan, and you’re not 18 yet, consider getting a joint loan with your parent(s) or guardian for example. 

Am I Allowed to Appeal a Car Loan Decision? 

If your lender declines your car loan application, and you feel you want to contest your car finance decision, you are well within your rights to appeal the decision. Your car finance provider will then review the appeal request. Also, note that you can appeal a car loan decision even if it is accepted and you’re not happy with its conditions. 

You can usually appeal any formally declined loan application, but you’ll have to do so within 30 days or the information won’t be valid. 

Does Being Rejected for Car Finance Affect Your Credit Score?

There are two types of credit checks that can be performed by your lender: soft checks and hard checks. Soft checks don’t harm your credit score, and those are the checks that are performed when you ask for a decision in principle from your lender. However, when you actually apply for loans, lenders will perform hard checks and it will be recorded on your credit score for 12 months. 

Surprisingly though, the actual outcome of your application, i.e. whether you’re rejected or accepted for a car loan, won’t impact your credit score - it’s just the act of checking in itself that leaves its mark on your credit report. Also, always keep in mind that ​​making multiple applications in one go will damage your credit score, giving lenders the impression that you can’t handle a loan. And if you contest a car loan decision that won't go against you either. 

Appeal Rejected? Increasing Your Chances for Next Time

Don’t panic - there are actionable steps you can take in case your appeal is rejected. Let’s look into some of them. 

Try Applying With a Guarantor 

A guarantor is someone who can make your payments if you fail to do so within the term of your car loan. Guarantors may help your lender view you as less risky, therefore granting you a loan more easily than without one. 

Work on Your Credit Score

For many people, rejected applications are because of poor credit scores. With a bit of effort, you could rebuild your credit score in no time. Here are a few easy things you can do to help:

  • Get a credit building micro-loan
  • Check your credit score often to monitor your progress
  • Make sure you don’t miss any payments
  • Hold off on applying for new accounts for a while
  • Make sure you’re on the electoral roll
  • Check your addresses and personal information are up to date
  • Check for any errors on your credit report

The Bottom Line

Car finance, though it can be life-changing, can also be hard work. But it's good to know there is such a thing as a car finance decision appeal - and always worth a try, especially if you think they may have misunderstood your financial position. So, here at Carmoola, we take the hassle out of car finance, leaving only the fun of getting your hands on your dream car. You will get a decision in minutes and the app is very easy to use.  Contact us for help in getting your car loan in a few easy steps, 100% online! 😍