If you've been refused car finance, you are probably wondering why you were declined.

Why Were You Refused Car Finance?

If you did an online application for car finance, you may not have spoken with anyone through the application process.

Asking the lender or broker that you submitted the loan to for the reason for the refusal is the best place to start.

Here's the most common reasons that people don't get approved:

Asking For More Than You Can Afford

To be approved for a car loan, you need to be able to afford to repay the amount that you borrow.

When you apply for a car loan directly with a lender, they might approve or deny your application based on the amount that you ask to borrow, without doing an assessment and offering you other options.

Credit Score

If you have previously been bankrupt or missed a credit payment, some lenders won't provide you with finance. To have your car finance approved you'll need to get a car loan with a specialist lender.

If you don't know what your credit score is, you can apply for a free credit report once a year with any of the four Australian credit reporting bodies.

Responsible Lending Criteria

All private car loans are regulated by the National Consumer Credit Protection (NCCP) legislation. This sets out guidelines that help to protect consumers from getting into debts that they will not be able to repay.

Lenders must create their servicing calculators and lender requirements to comply with these guidelines. The lender must demonstrate that they have made reasonable enquiry to ensure you can afford to repay the loan:

• Employment or other income must be above the minimum living requirements.

• Surplus income must be available to repay the loan.

How To Get Approved For Car Finance:

Here's some things you can do to increase your likelihood of car finance approval:

1. Use A Car Loan Broker

Using a car loan broker allows you to assess what's available in the market before you start a car loan application.

Rather than going in blind and hoping for the best, you can take the guess work out of your car loan application by getting a full car loan assessment, including a credit check and a recommendation on which lenders you should apply to.

2. Know What You Can Borrow

Use a car loan calculator to find out how much you can really afford to borrow. To do this, you need to work out how much extra income you have to put towards your car loan, and then adjust the settings until you find a repayment amount that is comfortable.

3. Spend Less Than You Earn

This could mean increasing your income before you apply again for car finance, or cutting down on any unneeded spending. Demonstrating regular savings over a few months shows you can afford car loan payments, increasing your chances of being approved for car finance.

You could also consider making a joint car loan application to increase the total income available.

4. Boost Your Credit Score

Having stable employment, residence, and making credit repayments on time will increase your credit rating over time, even if you have a default or bankruptcy in your past.

Following these steps will greatly increase the likelihood that your next car finance application will be approved.