When is a car loan refused and why? We clarify

Why a car loan is declined and what you can do then The trusted car dealer has been found, the vehicle of your choice is immediately available, the purchase contract may already be ready for signature – and the car loan applied for at the bank is rejected. How could that happen? When is a car loan refused? Who actually writes and advises here? About us On this page Why is the car loan refused? How do I get a car loan anyway? Compare loans directly

Why was my loan application rejected?

Why was my loan application rejected?

Roughly speaking, there are two reasons why a bank rejects a loan application: Either the applicant did not meet all of the acceptance guidelines. Or the applicant’s creditworthiness is not sufficient for the loan amount.
The formalities were not met

On the one hand, the banks have in-house acceptance guidelines and, on the other hand, they have to comply with statutory guidelines. This results in a list of acceptance criteria that each applicant must meet. Due to the in-house guidelines, the requirements may differ from bank to bank, but the requirements are usually similar or similar.

Banks often require the following:

  • majority
  • First residence in Germany
  • Account in Germany
  • Verifiable monthly income

The creditworthiness is not sufficient

When it comes to creditworthiness (also called creditworthiness), monthly income is not the only thing that consumers sometimes assume. Rather, there are two things:

  • The ratio of income to loan amount
  • The prospective willingness of the applicant to pay the loan installments on time and in full

The relationship between income and loan amount is that the income is sufficient to easily pay the monthly loan installments. With a low income, you can easily get a car loan with a small loan. With a large loan amount, however, there may be problems.

A reason for rejecting the loan can therefore be an overly chosen loan amount!

When asked how likely it is that the applicant will pay their monthly installments as agreed, the bank looks at the applicant’s payment history in the past. The bank first takes a look at its own documents if the applicant is already a customer of the bank: Have the installments been paid on time with an earlier installment loan (not just car loans)? The bank then contacts Credit Bureau, Germany’s largest credit agency. Here she asks the applicant’s score. The score is a single number that indicates how well or how badly the applicant has recently paid his bills to banks, retailers, online retailers, etc. The behavior was good with a high number, rather bad with a low number.

If the bank now believes, based on the information available, that the applicant can fully repay the financing, the car loan is approved. If not, there is a rejection.

Another reason for rejection can be the bad payment behavior in the past!

How do I get a loan anyway?

How do I get a loan anyway?

If a car loan has been rejected, you can of course apply for funding from another bank. However, the prospect of success is rather slim here. Because if the first bank already had concerns, the second bank is likely to share those concerns – either because the loan amount is too high or the credit rating is insufficient.

If the loan amount is too high, the clerk at the bank will notice this when you apply. Inadequate creditworthiness is determined at the latest when the bank has the Credit Bureau score.

So there are only two things left to get a car loan: improve the Credit Bureau score or reduce the loan amount. Ideally, one tries to do both.

Improve Credit Bureau Score Credit Bureau does not disclose which factors the score is calculated from, at least for the most part. The credit agency has released only a few details.

However, there are speculations as to which things actually affect the score. These probably include:

  • the amount of liabilities (debts) to banks, mail order companies etc.
  • Frequent bank refusals for loan requests
  • the use of the overdraft facility (overdraft facility)
  • the number of credit cards
  • the frequency of the change of residence

The credit agency evaluates all of these things as an indication of a more relaxed handling of financial resources or an unstable lifestyle, which suggests a loose handling of financial resources.

Reduce loan amount

Of course, it is not easy to significantly reduce the financing requirement once it is clear which vehicle you want to buy. With a car loan over a five-digit USD amount, it makes little sense to reduce the loan amount by just 500 USD if you want to increase the chances of financing.

You now have two options: either to reduce the loan amount and to procure the missing amount for the purchase amount elsewhere (e.g. through savings or a private loan), or you can choose a cheaper vehicle.


How many loans can you have simultaneously?

If you have one or more loans in progress and you need to obtain additional liquidity, before applying for another loan it is important and necessary to make the right assessments in order to avoid over-indebtedness. Nowadays, in fact, it is normal to have more than one financing in progress : together with the classic silent house, Italians often find themselves with additional financing at the same time as the loan for the car and to renovate the house or even even to go on vacation. But let’s see how many loans you can have simultaneously.


Is there a limit to the funding that can be had at the same time?


Generally there is no universal rule established by banks or financial companies on how many loans you can have at the same time, but in principle depending on the type of loan you choose you can have co-financing provided that you have the ability to support the installments of the various debts and therefore not get into too much debt. Obviously, all banks and financial companies have their own credit rating assessment rules which are more or less flexible. But then, what is the maximum sum that can be had or rather what is the maximum installment that can be supported? The Mirrorata portal can answer this question, which helps to understand what the debt limit should not be exceeded. In any case, since the most important thing to keep under control is the maximum installment that is sustained given by the sum of all the loans in progress, a valid form of refinancing of all the loans is the transfer of the fifth.


Why does the assignment of the fifth help to decrease the ongoing loans?

money loans

The assignment of the fifth is a convenient form of non-finalized loan that allows you to obtain high amounts and to return them in monthly installments of up to 10 years. This is one of its strengths: being able to repay an amount in 120 months, allows you to lower the amount of the monthly installment. How can this feature be used? If you have more loans in progress and the sum of the individual installments is particularly high, you can request a transfer of the fifth to pay off all the debts and consolidate them in a single installment much lower than the sum of the previous ones. This operation is called “debt consolidation”. The assignment of the fifth can in fact be requested regardless of the number of loans in progress and can therefore be used to consolidate them and eliminate too many installments to be paid, combining them in a single and more convenient solution.


Broken washing machine? It will be paid by an online loan

washing machine

A broken household appliance cannot work for too long. If there is no money left in your financial budget, you will simply have to take out a loan. Do not worry about it, applying for a loan today is quite simple and you do not have to be ashamed of it at all. Indeed, you may not meet with your application or anyone, everything is handled online.

Online loans have been a hit in recent years. Thanks to them, almost everyone gets money, because they are usually provided without complicated screening of applicants. People also like the fact that they do not have to go anywhere with a prosek, they handle everything behind the screen from the comfort of their home.


Try to borrow interest-free

Try to borrow interest-free

You may not know about it yet, but many non-bank lenders are willing to give you your first free loan. Although this is no exorbitant sums, but a few thousand for a new appliance will probably get interest-free. Usually, this benefit is only granted to new clients on the first loan. Nothing prevents you from taking out a loan each time with another company so that you are always a new client. Not that it would be good to borrow regularly, but that is another story.


Calculate carefully if you can repay

Calculate carefully if you can repay

Interest-free and usually every short-term loan is provided for one month (more precisely 30 days). It is therefore designed as an immediate financial injection, which you pay immediately after the next payout. If you know you can’t do it, apply for a loan for a longer period of time. It is always cheaper than if you took a 30-day loan and then extended it. Because even if you speak in time and admit that you will not be able to repay the amount by the set deadline, you will pay the renewal fees. And they are not exactly small, just the non-bank lenders make money.


Do not borrow on uselessness

washing machine

A broken washing machine or fridge is an expense for which it is worth borrowing. New shoes, holiday or birthday present sun. You should never borrow on uselessness. Sadly, we have to mention this, but many Czechs still do not understand this basic rule.


Get Low Interest Loan


Loans can sometimes be quite expensive – of course, this depends above all on the amount of interest, but also on the ancillary loan costs, which is why it always makes sense not to focus on the nominal interest rate but on the effective interest rate of the loans when comparing loans To consider. Unfortunately, loan interest rates are sometimes difficult to compare, and finding a loan with low interest rates can be difficult.

Effective interest rate

Effective interest rate

Because the banks do not advertise their loans with the nominal interest rate, but with the effective interest rate – that is, the ancillary loan costs that are incurred are already included in the interest rate, but the details are never the final interest rate.

The final interest rate is always determined by the creditworthiness of the borrower – accordingly, the advertised interest rate, which appears, for example, in loan advertising, is always an idealized interest rate – but borrowers only receive this if their creditworthiness is excellent.

Excellent or very good creditworthiness – this means that there are no disturbing negative Credit Bureau entries in the borrower’s file, that he has an attractive income that is sufficiently high and also regular, and that, depending on the type of loan and loan amount, he has the usual bank collateral.

Case of the loan with poor credit rating

Case of the loan with poor credit rating

The poorer the customer’s creditworthiness, the more the bank adds to the requested interest rate in order to limit the risk that it takes by lending the money. The elimination of risk considerations generally means that the price of the loan becomes more expensive, for example in the case of loans that are permitted without Credit Bureau information, such as can be found abroad, offered in Germany via credit brokerage.

A negative Credit Bureau information does not necessarily lead to an increase in lending rates – on the one hand, it is relevant to what type of negative Credit Bureau entries it is, because not all weigh the same weight, and on the other hand, a bad Credit Bureau does not necessarily mean that the Creditworthiness is bad.

The relevant plus for the bank, which remains after deducting expenses from the borrower’s monthly income, is relevant, because this amount shows how much capital the customer has at his free disposal.