Can’t get a loan despite good credit score
Discussion
Hi guys, I’m looking at getting a loan to help buy a car but I keep getting declined and I have no idea why. The loan I’m applying for is roughly 60% of my annual income, I have no debt on credit cards etc, I’ve had a previous loan which I paid off early and recently had finance on a watch which was paid off as planned, so why can’t I get a loan? My credit score is excellent.
Thanks.
Thanks.
DomesticM said:
Hi guys, I’m looking at getting a loan to help buy a car but I keep getting declined and I have no idea why. The loan I’m applying for is roughly 60% of my annual income, I have no debt on credit cards etc, I’ve had a previous loan which I paid off early and recently had finance on a watch which was paid off as planned, so why can’t I get a loan? My credit score is excellent.
Thanks.
High loan-to-income ratio, not a home owner, minimal credit history, paid only finance agreement off early, unsecured lending.......Thanks.
DomesticM said:
Hi guys, I’m looking at getting a loan to help buy a car but I keep getting declined and I have no idea why. The loan I’m applying for is roughly 60% of my annual income, I have no debt on credit cards etc, I’ve had a previous loan which I paid off early and recently had finance on a watch which was paid off as planned, so why can’t I get a loan? My credit score is excellent.
Thanks.
If you look at it from a lender’s perspective then it might be easier to see the issue. If the only collateral you have is your job then if you lose that job then you instantly become wholly unviable. The car would only have 40% of equity at the outset but this would arguably be falling quicker than you’re repayments so in the event of a default there really isn’t any fat in there to cover costs. Thanks.
It’s probably just a case of putting more money down at the outset.
ATG said:
Excuse ignorance, but will the potential lender not tell you why the loan is not being offered?
Generally speaking, the people who run the scorecard for the business don't like to reveal the actual reason, as it just encourages people to "correct" their application next time 
blue_haddock said:
DomesticM said:
The loan I’m applying for is roughly 60% of my annual income,
Thats probably why i'd imagineWhy would this be an issue if the loan was over several years (I note OP hasn't stated the duration or how monthly payments stack up with take-home pay)?
If it was, for ease of calculations, a £60,000 loan on a salary of £100,000. Whilst this would be 60% of annual income, over 4 years it would equal only 15% (£60,000/£400,000).
Numbers, logic and fact all start to get skewed here but, in affordability terms, that's £63,000 (assuming 5% interest front-loaded) over 48 months. I can't expect £1.3k to be an issue for someone taking home ballpark ~£5.5k a month.
OP - lots of applications in a short space of time is also going to hurt you so stop applying. You'll need to leave it at least 6 months for those to have less (or no) impact on a new application.
You say you've checked your credit score; these sites (Clearscore, Experian and Noddle) also work with lenders to show you which loans you'd be most likely to be accepted for - did you look at those?
You say you've checked your credit score; these sites (Clearscore, Experian and Noddle) also work with lenders to show you which loans you'd be most likely to be accepted for - did you look at those?
mholt1995 said:
Just out of interest as I'm intending on taking out a loan of 15% of my annual income next year (2y period) and a ~50% one (4 or 5y period) in a few years time and I'm also not a homeowner.
Why would this be an issue if the loan was over several years (I note OP hasn't stated the duration or how monthly payments stack up with take-home pay)?
If it was, for ease of calculations, a £60,000 loan on a salary of £100,000. Whilst this would be 60% of annual income, over 4 years it would equal only 15% (£60,000/£400,000).
Numbers, logic and fact all start to get skewed here but, in affordability terms, that's £63,000 (assuming 5% interest front-loaded) over 48 months. I can't expect £1.3k to be an issue for someone taking home ballpark ~£5.5k a month.
What’s the lender’s collateral if you lose that income? It’s about worst case scenarios and fitting risk profiles. Why would this be an issue if the loan was over several years (I note OP hasn't stated the duration or how monthly payments stack up with take-home pay)?
If it was, for ease of calculations, a £60,000 loan on a salary of £100,000. Whilst this would be 60% of annual income, over 4 years it would equal only 15% (£60,000/£400,000).
Numbers, logic and fact all start to get skewed here but, in affordability terms, that's £63,000 (assuming 5% interest front-loaded) over 48 months. I can't expect £1.3k to be an issue for someone taking home ballpark ~£5.5k a month.
And in reality, someone with a high income who can show no assets or wealth is a worse credit risk than someone in the same boat but with a lower income.
Ie you’d expect someone on a low income to be renting and to have little savings but someone in the same boat but with a high income is painting the statistical picture of a reckless spender and a liability.
Stella Tortoise said:
If it's an unsecured loan there is no security other than recourse to civil law.
If it's HP on the other hand...
You just don’t want to get into default action in the first instance with this type of lending. If it's HP on the other hand...
There’s a higher risk with higher salary as someone earning £20k who loses their job can more easily find a replacement form of income to service their obligations than someone on a high income who will struggle much harder. At the same time, someone in a high income who needs to borrow 60% of their annual income for a car is clearly a high spender and a risk.
I imagine most basic lending models will instantly reject a high earners whose only ‘asset’ is their income and looking to borrow 60%.
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