With today’s rocky economic climate, dramatically increasing costs of living, and skyrocketing vehicle prices, it’s no wonder why consumers are somewhat fearful of being rejected for credit. Moreover, most of us need to rely on credit when purchasing a vehicle.
If you’re worried that your application might be rejected, here are five top tips to increase your chances of being granted credit.
Determine Your Affordability
Before you start filling out applications, you must establish how much you can spend on a vehicle. For this, you must take your income after tax and deductions and minus all your expenses like rent, food, subscriptions, and debts to determine your disposable income.
Your disposable income can be spent on luxuries and essential credit, like monthly car installments.
Once you have established your disposable income, use a finance calculator to find out how much your repayments will be. If your disposable income comfortably covers your repayments, you have a higher chance of approval.
Improve Your Credit Score
Even if you can comfortably afford the loan repayments, you might still be rejected if your credit score is even a little lower than it needs to be to meet lender criteria.
A low credit score is a deciding factor in credit approval, so find out what your credit score is and find relevant ways to improve it. To improve your credit score, you must pay bills on time, save some money monthly, and eliminate debt and credit usage.
Save For A Deposit
Paying a deposit is not always necessary; however, it will benefit your pocket in the long run. Moreover, paying a deposit also reduces your debt total, so you’ll have a higher chance of approval because you’ll be applying for a smaller amount of financial aid.
Eliminate Debts
It’s essential to eliminate debts when improving your credit score. But beyond this, it’s also crucial to ensure you can afford the repayments for the duration of the agreement.
If you are currently juggling several debts, you can consider the snowball method, which recommends prioritizing smaller debts first. The avalanche method is also effective, and this debt repayment strategy recommends prioritizing larger debts first. Both approaches can reduce the amount of interest you pay in the long run, which means you’ll also be debt-free sooner.
While you are relieving yourself of debt burdens, you will also be creating statement evidence that you are a trustworthy consumer. As a direct result, your chances of credit approval for vehicle finance will increase substantially.
Apply With Caution
One action you must avoid when applying for any kind of financial assistance is the mistake of applying with too many lenders at once. Unfortunately, this will lower your credit score and instantly reduce your chances of approval by all lenders.
It’s wise to apply with a lender using caution; take your time to find a suitable lender with low-interest rates. Read through lender criteria for vehicle finance products carefully, and be sure you can afford the repayments by budgeting with your disposable income.
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