Why Fresh Graduates Can’t Get a Car

You have finally graduated university after years of studying and are now armed with a degree certificate and a brand new job. Your whole life is ahead of you, it’s only natural to feel giddy and anxious with anticipation of what’s ahead. If what’s next on your checklist of things to do when entering adulthood is getting a fresh graduate car loan, we have some bad news for you. It may not be as easy as you are anticipating. Instead, getting a car loan as a fresh graduate is another challenge for you to overcome, just like graduating and becoming employed. Here are some reasons why that is:

You are unable to provide the necessary documentation

Getting a job is an amazing achievement but only just getting a job is something of a problem. When applying for a vehicle loan, you must show your financial records, including pay stubs if you are working. To guarantee that you have a reliable income, most banks need at least six months of job history. As a recent graduate who has just started their first job, this means you must wait at least six months before asking for a loan. Other essential papers include your Employee Provident Fund (EPF) statements which you will not have unless you have previously worked. Lacking these documents severely handicaps your chances of getting a car loan.

You lack a credit score

In addition to that, you are also required to have a credit score when applying for a car loan. During your application, you’ll almost certainly hear the phrases Central Credit Reference Information System (CCRIS) or Credit Tip-Off Service (CTOS). The Credit Bureau of Bank Negara Malaysia manages CCRIS, whereas CTOS is a private organization. Most Malaysian financial institutions analyze your credit health using both CTOS and CCRIS data which will construct your credit score based on your financial factors. The higher your score, the better your chances of getting a car loan.

You may not have a credit score as a recent graduate since you do not have any debts in your name so your credit score falls under “no score” on the CTOS scale. As a result, banks are reluctant to lend to you since there is no guarantee that you will be able to return the loan amount.

Your Debt Service Ratio (DSR) is too high

Banks will compute your Debt Service Ratio (DSR) to determine whether or not you can afford the car loan you applied for. This DSR is significant since it may make or break your application; essentially, it determines if you have enough cash on hand to support a lifestyle after subtracting your monthly obligations. Each bank has a separate DSR limit. If your DSR is too high then the bank won’t have the confidence to approve your car loan request.

If you’re struggling to get a car loan as a fresh graduate, don’t feel discouraged. There are multiple ways for you to buy a car of your own. Plenty before you have done it, you can achieve it as well!