CIBIL Score for Car Loans

Owning a car is not a luxury but has become a necessity these days. Everyone wants to have the vehicle of their dreams, but everyone may not be able to afford it. So, there exist car loans that help you achieve that dream. A car loan will help you to pay for the car today. Borrowers can repay the loan in easy and affordable installments. However, certain prerequisites need to be fulfilled before taking a car loan which is discussed below.

Eligibility for Car Loans-

The general eligibility to get a car loan are:

• The minimum age should be 21 years
• A stable and minimum monthly income
• Good credit history
• A credit score of 750 or above

Out of the above-mentioned factors, CIBIL Score is one of the main factors that is checked by your lender to evaluate your creditworthiness. However, there is no fixed minimum CIBIL Score for car loans. In general, it is advisable to have a score of 750 or above to stand a good chance of being approved. The CIBIL Score ranges from 300 to 900. The higher your score, the better will be your ability to get your loan sanctioned.

Tips on how to avail of a car loan with a bad CIBIL Score?

If you have a low credit score or no credit history at all. Then, also you can avail of a car loan. This is because of the advent of technology in the finance segment. Most of the lenders have introduced new methods by which to provide funding to individuals with bad credit. The following tips will help you to get a car loan with a bad CIBIL Score- 

• Check your credit report before applying for a car loan: Getting a car loan with a bad or low credit score can prove costlier compared to those having a good one. What you need to do is get a free copy of your credit report from one of the credit bureaus and check it thoroughly. If you have a bad, work towards improving it before applying for the loan. Some of the ways by which you can improve your credit score are by paying off existing debts, outstanding dues, and making payments on time.
• Do not apply for multiple loans in a short time: Before applying for a car loan, clean up your credit, and do not take up additional credit. When processing your loan application, banks will look for red flags such as late payments, outstanding debts, tax liens, bankruptcy, etc before approving your loan application.
• Check the current interest rate of car loans: Compare various car loan offers online and choose a car loan with a low-interest rate. An applicant with a good credit score can get better rates.
• Borrow according to your repayment capacity: EMI payments should not exceed 50% of your salary. Maintain a low debt-to-income ratio. A high debt-to-income ratio means higher chances of defaulting on loan payments. You can calculate your monthly EMI payments for the chosen loan amount using the car loan EMI calculator to know the overall cost of your car loan. It will also help you to plan your finances.
• Apply for a pre-approved loan from your bank: Some financial institutions also offer pre-approved loans to their existing customers based on their KYC paperwork. In such a case, even if you have a bad credit score, you have higher chances of obtaining a car loan from your bank. For this, you will have to talk to the relationship manager at your bank and negotiate terms.
• Lease a car instead of purchasing one: Lease payments are comparatively lower. This is a suitable option if you do not cover too many miles in the car. Or else, you will end up paying high service charges and other fees. Also, this is an ideal option for those who have a habit of changing cars every few years.
• Collateral loan: If you have a low CIBIL Score, some lenders may be willing to offer you a loan only when you put your car as collateral with them. The car will remain in possession of them until you repay off the loan amount in full.
• Apply for a joint car loan with a family member or spouse: If your spouse or any family member has a good CIBIL score, you can opt for a joint car loan application, which will be analyzed based on both of your CIBIL scores.
• Get a guarantor: Getting a guarantor for your loan will likely improve your chances of getting a car loan. In such cases, your guarantor’s CIBIL score will be considered while assessing your car loan application.

I hope the above information will help you to know your credit score requirements needed for car loans before filing your loan application online.