If you've been refused a car loan, it can be disheartening, especially if you're in desperate need of a car to get around. For many of us, buying a car outright is unrealistic as they can cost thousands of pounds to purchase. More drivers are choosing to finance their next car instead to help spread the cost of ownership. If you've been declined a car loan, it's more common than you may think but you may be left wondering why. The guide below explores the top 5 reasons why your finance may have been declined and what you can do next to increase your chances of future approvals.

1. You don't meet the lenders criteria.

In some cases you may be refused car finance on the basis you simply don't meet the lenders criteria. Each car finance lenders sets their own lending eligibility which customers must meet first before they could receive an approval. Lenders may require customers to meet a certain credit score band, earn over a certain amount each month or have a certain type of driving license.

What to do next? It's always worth checking the lenders criteria first before applying or using a soft search eligibility check which won't harm your credit score to see if you would meet their criteria. This can help to save time and means you only apply with the lenders you could be approved by.

2. You have a bad credit history.

It can be harder to get an approval for finance when you have a bad credit score. Low credit scores usually indicate missed or late repayments in the past, credit mismanagement or lack of previous credit history. Whatever your reason for a low credit score, you may be seen as more of a risk to lend to, and lenders may decline your application if they think you're likely to default on future loans too.

What to do next? Check your credit report and make sure all the information listed on there is accurate and up to date. You should then look to increasing your credit score over a number of months before you try to apply for finance again. Not only could a better credit score see you get an easier approval, but it can also help to lower your interest rate offered.

3. You can afford to get a car on finance.

If you have a limited monthly budget, it can be harder to obtain finance as you may not be able to afford it. Lenders perform an affordability check on you when you apply and your income can be proven through bank statements to see if car finance would be a good financial choice for you. It's unethical for lenders to give money to anyone who can't afford to pay it back and it goes against the rules of responsible lending.

What to do next? If you're income is low, you may need to wait until your wage increases or find a specialist lender whose income criteria is lower than others. You may need to be in a new job for at least 3 months before you could get approved for finance so it's worth keeping in mind.

4. You don't meet the age requirement.

You may be declined if you are too young or too old for car finance. Finance is a legal agreement which means you need to be at least 18+ years old before you could be considered. It can be harder to get approved when you are between the ages of 18-21 years old though as you may not have had much chance to build a credit history yet. Similarly, lenders will often set a maximum age requirement of 70 years old too.           

What to do next? If you're a young drive applying for finance, it can be a good idea to build a small credit history first if you dint have one. This can be as easy as getting a mobile phone contract in your name and setting up a direct debit to meet the repayment each month. You'll then have a credit history in place to show future lenders you can be trusted to handle loans responsibly.

5. You don't have an employment status.

Whilst you can find car finance that accepts benefits as a source of income, it can be harder to obtain finance if you don't have a job or revive any income at all. Lenders tend to prefer applicants who reach their income requirement and have a stable and steady job. Car finance agreements can last for a number of years so lenders want to make sure you can meet each and every payment based on your current employment.

What to do next? If you're struggling to get approved due to no employment, it can be hard to find a lender who will accept you. You could get finance with benefit income if you meet the requirements or it's best to wait until you are in full or part time employment before you try to finance a car.