Are you planning to take a car loan? If so, it is important to know the minimum CIBIL score for car loan and all about a car loan for low CIBIL score.
CIBIL scores range between 300 and 900, and a higher score is considered better. Generally, a score of 700 and above is considered good enough for any credit product.
The required CIBIL score for car loans at most banks is 750 or above. But there are certain points that will be considered in addition to your CIBIL score -
Your entire credit history is taken into account when you apply for a loan, and the same applies for a car loan. How old your credit history is, how regular you have been with your payments, the mix of credit that you have taken, all play a role.
It is often easier to get a loan for a new vehicle than for a used one. Also, the price of the car you choose will have an impact on the ease of getting the loan.
Your credit utilization ratio should be maintained below 30%, and a good CUR will help you get faster and easier loans.
Your income plays a role in getting a loan. If you have a high paying secure job, the chances of getting credit increases drastically. Most banks give faster and larger loans to people who are salaried than someone who is self-employed.
It might be difficult for you to get a car loan with a low CIBIL score, but it is not impossible. Here are some things you can try if your CIBIL score is low -
Subprime lenders specialize in providing loans to individuals who cannot get loans from traditional lenders. Although the interest rates may be higher, they offer car loans even if you have a low CIBIL score.
Consider adding a co-applicant or guarantor who has a strong credit history and a higher CIBIL score than you. The lender would consider the combined creditworthiness of both applicants, thereby increasing your chances of getting a car loan.
Offering a larger down payment reduces the loan amount and demonstrates your commitment to the purchase. This can convince lenders to consider your car loan application despite a low CIBIL score.
In a secured car loan, the vehicle serves as a collateral for the loan. Lenders may be more willing to provide financing based on the asset's value, even if you have a lower credit score.
If you happen to have a high income, a good bank balance, and a secured job, lenders might be willing to provide loans despite the low score.
Almost all lenders check your CIBIL score before approving your loan. Here are some reasons why your CIBIL score plays an important role in you getting a car loan -
Helps the lender know about your creditworthiness
Helps them decide the interest rate, loan amount, and tenure
Lenders can understand the risk associated with giving you a loan
The process of improving your CIBIL score is difficult but not impossible. Here are some strategies you can consider -
Pay your credit card bills and EMIs on time
Maintain a Credit Utilization Ratio of 30% or less
Create a mix of credit with secured, unsecured loans, and credit cards
Check your credit report regularly and raise disputes if you see any errors
Don’t enquire for too many loans at the same time
A good CIBIL score significantly impacts your ability to secure a car loan. While the minimum CIBIL score required for a car loan varies among lenders, having a higher score increases the chances of loan approval.
But, if you have a low CIBIL score, you can still explore alternate options, such as subprime lenders or adding a co-applicant/guarantor. With consistent efforts, you can significantly improve your CIBIL score and increase the likelihood of qualifying for a car loan at favorable terms.
Yes, a score of 600 or above can be considered for a car loan. But a score of 750 or above is considered to be highly favorable. Your creditworthiness depends heavily but not solely on your credit score, and other criteria will also be considered before your loan gets approved.
In India, both the CIBIL score and the Experian score are considered by banks. But most banks prefer the CIBIL score and it is the most commonly used score.
Just like other banks, even SBI doesn’t have a fixed CIBIL score that a borrower should have. Other parameters like your income, job stability, debt to income ratio will play a role in deciding your eligibility for a car loan.
If you are a defaulter, you can get a secured car loan wherein your car will be considered an asset. This gives security to the lender, as they have the collateral to fall back on.
There is no minimum salary required for car loans. Cars are available at a varied price range, and there must be a car that banks and you will feel is affordable for you.
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