Apply Now

7 Hidden Reasons Why You Didn’t Get Approval for a Car Loan

Posted by Auto Loan Solutions

The reasons for car loan denial are often right under a person’s nose.

When a lender says you “don’t qualify for a car loan”, the cycle of negative thinking fires off like a light show on New Year’s Eve.

You might ask yourself, “is my credit that bad?” or say, “I thought I was getting better with my finances!” All of these thoughts can leave you feeling down. But the reasons as to why you may not qualify are neither cryptic nor hard-to-uncover. In fact, they’re often easy to explain.

There are literally hundreds of little things that can put a wall between you and car loan approval, but we’ve examined a few that are easily overlooked. In fact, we suggest that you consider the nine reasons listed below, if you’re having trouble getting approved for a car loan.

1. Poor Timing

When talking about timing, the hour of the day you apply isn’t a problem – it’s your circumstances are what can get in the way. Take for example your job status. You may have just applied for another loan, or are currently on probation at a new job.

Both of those scenarios, and many more, can keep you barred from a car loan. In the case of applying for another loan (ie. business or student loan) the recent credit checks and added ratio of debt could lower your score, making it a bit tricky to get approval for a car loan.

As for a recent job change, your probation period is a “trial”, meaning there’s no guarantee you will get the position after three months. Therefore, the lender may will likely defer your request until you are a full-time employee, and in a position to make regular payments.

The job change scenario is easier to deal with – you just need to wait things out. However, if another loan seems to be the problem, might have to get a cosigner, or reduce your debt with lump sum payments.

2. Credit Report Errors

The bureaus handling your credit information don’t always have their facts straight. For example, you could have a bankruptcy from beyond seven years ago, or a missed payment which shows up as collections report, when there was some mistake on with your billing.

If those details still linger on your report, the lenders, who have now idea that such information is inaccurate, will label you as too risky based on what they see. Of course, this is wrong. However, the lenders won’t take it upon themselves to go out and investigate.

That’s where you come in. If you’re confident that you have healthy credit and a good payment history, obtain a credit report (you should do this once a year anyway) so you can dispute the claims. You just may find an error that the credit reporting agency needs to remove.

3. Missing Documents

Lenders need to see a series of documents before you get approval for a car loan. If one of these items don’t get submitted, then the lenders simply can’t process your application. It’s that simple.

But you most likely won’t get far if you fail to present the required documents. Right from the start, you will be asked to provide the documentation needed to make your loan approval happen.

With that said, the simple fix is to comply with these requirements. In most instances, you’ll need to show a driver’s license, proof of income (POI) and auto insurance info.

4. Providing Wrong Information

Somewhat related to the last point is the issue of missing documents, is the issue of wrong information. Again if you have the wrong set of info, you’ll know rather fast – the application won’t go through if your credentials are incorrect.

Realistically, no individual who truly wants an auto loan would give a financing company the wrong the information. However, an applicant is more likely to give the wrong information accidentally, whether it’s because of misspelling or mixing the details of their address.

The fix for this quite simple: Double or triple check what you type into those forms. The extra time spent will save you from the hassle of having to repeat the process more than once.

5. Non-Standard Income

Lenders will either grant or deny you a loan based on your income, as picky as it may seem. Remember, they’re on the lookout for patterns and probabilities. Certain job situations or payment structures can point out whether a person is more or less likely to pay their loan regularly and on time.

For example, if your income is irregular – perhaps you work on commission and each paycheque may vary – there’s a risk that one month may yield very low funds, affecting your ability to make a loan payment.

Another common issue is unreported employment, often referred to as “under-the-table” work. Applying for a loan under these circumstances almost always leads to denial, because a lender cannot verify your income as it’s not registered by the government.

The fix for this is somewhat tricky. You obviously can’t just walk away from your job, so you’ll have to find an alternative. Getting a cosigner can help you tremendously in this regard.

Certain job types can and their payment structure can influence your car loan eligibility.

6. Your Credit is Too Young

Believe it or not, your credit has an “age”, and that can either lead to car loan approval or denial. If you’ve only had credit for a short time, you most likely haven’t established a strong record that would land you a higher score – of course, lenders prefer to see higher numbers.

This is generally a problem if you’re young and just starting out, or if you’re new to Canada. Building credit is about establishing your reputation. Unfortunately, you may need financing well before you’re in a lender’s good books, making approval for car loan harder to get.

Fortunately, we’ve mentioned the solution to this problem a few times already – buddy up with a cosigner. Sharing the responsibility of a loan with someone who has strong credit can allow you to qualify for a loan

7. You’re Simply Asking for Too Much

Sometimes, demanding too much from a deal can make car loan approval seemingly impossible. For example, if you wanted a BMW M6 coupe, which carries a $126,000 price tag, but pull in only $2000/per month and have a high debt-income ratio, it’s safe to say your imagination is running too wild.

The best technology, the best stylings – whatever you desire – tends to make a car pricier. If your credit is poor, a lender will likely see your request as a greater risk, leading to denial.

And this works for those with good credit too. If your choice of car is beyond your means, factors such as your income and length of financing could make you ineligible for a loan.

Ironically, the fix for this problem is hardest one to address, because it tugs at your  emotions. Yet it’s quite simple, at least on the surface – you need to exercise modesty!

Asking to drive what a celebrity owns will likely mean car loan denial.


As we mentioned earlier, there could be dozens of reasons why your application for a car loan turns into a hassle. There are some shady dealers out there, but sometimes the root of your problems are your own finances, circumstances or choices.

That’s your first line of diagnostics should involve a look at yourself. If car loan approval is an issue, take a look at your financial situation and current circumstances. The problem may not be so hard to identify (or fix).

Apply Now!

Apply Now