Category: Car Loan

Are poor credit scores holding you from buying your dream car? Check out expert tips on how you can get an approved car loan with a low CIBIL score.

Getting a car loan for a low CIBIL score can be a tough task. Even when you receive approval for it, lenders might charge you higher rates of interest- eventually leading to significant EMIs and the overall increased loan burden.

With help from leading loan service providers or consultants like Real Money Solutions, you can get expert assistance on getting a car loan with a low CIBIL score. Repaying the car loan with timely payments serves to be a great way to improve your CIBIL score.

What is a CIBIL Score?

CIBIL is Credit Information Bureau (India) Limited. CIBIL is a popular credit information company with its license by the RBI or Reserve Bank of India. Other credit information companies licensed by the RBI are Highmark, Equifax, and Experian.

CIBIL India is an integral part of TransUnion – a multinational group in America. Therefore, credit scores in India are referred to as CIBIL TransUnion Scores. CIBIL Score is available as a numeric summary of 3 digits signifying your credit history, report, and rating. A typical CIBIL score ranges from 300 to 900. If your score is closer to the mark of 900, it is regarded as a better credit score or rating.

Importance of CIBIL Score for a Car Loan

Some of the main reasons why car loan lenders might want to check your CIBIL score are:

• Representation of Credit Health: The 3-digit dynamic numeric representation is the measurement of your overall creditworthiness -your overall eligibility for a loan. Just like other types of loans, car loans also follow the same procedure for the loan approval process as executed by financial institutions and banks.

The CIBIL score as specified in the CIBIL report, ensures that lenders are aware of your overall credit history, existing loans, timeliness regarding loan repayments, frequency of loan applications, loan rejections, and so more. The CIBIL score helps offer them insight into the potential of obtaining debt from you within a predetermined duration. It serves to be a deciding factor in the process of rejecting or accepting auto loan applications.

• CIBIL Score Based on the Range: Different CIBIL score ranges depict different aspects of your debt repayment pattern and credit history. The minimum CIBIL score for hassle-free and seamless loan approval is 750 -regarded as a decent score. The lower will be your CIBIL score, the lesser will be your opportunity to get a car loan approval.
• Determination of the Rate of Interest: With a CIBIL score below 600, you have a reduced chance of obtaining a car loan. The higher your CIBIL score, the higher will be your scope of obtaining the car loan approval. Therefore, a higher CIBIL score will not only make you eligible for a competitive rate of interest but will also help you to be in a position to ensure negotiation on the interest rate.
• Determination of the Amount for Car Loan: Just like eligibility for an car loan, a higher CIBIL score will deliver you the freedom to negotiate the loan amount while getting a better deal. Lenders of car loans mostly agree to offer a higher loan amount to end consumers with a decent credit history.  Through the right understanding of the requirements, you can get the best car loan in Mumbai.

Tips to Get a Car Loan Even with Poor CIBIL Score

#Work Towards Improving the Credit Score Before Purchasing a Car

The credit score is utilized by lenders to gauge your creditworthiness. The higher the score, the better your chances of securing an auto loan at your desired terms & conditions. The CIBIL score is calculated based on your credit history, including repayment of credit card bills, previous loans, EMIs, and others.

It is recommended to go through your credit score before applying for a car loan. Make sure that your credit report is error-free. If you have time, you can work on improving your credit score before buying your dream car.

#Pay a Larger Down Payment

One of the best ways to make sure that your car loan gets approval with a poor CIBIL score is by paying a larger down payment. Usually, auto loan lenders do not approve loans for 100 percent of the vehicle’s on-road price. The loan amount is responsible for covering only 80 percent of the price of the car. The borrower is expected to pay the remaining amount. This can be covered with a personal loan, which is completely different from a car loan.

When you have a poor credit score, making a larger down payment can improve the overall eligibility for securing an auto loan. As you opt for a lower down payment, it minimizes the LTV or Loan to Value ratio -minimizing the risks of the lenders.

#Bring Along a Co-signer

Usually, borrowers do not require a co-signer or guarantor while applying for a car loan. However, when you have a poor credit score, you can think of bringing along a co-signer for the process of the loan application. A co-signer is a person who takes on the responsibility of paying back the loan, and is in fact obligated to pay any payments missed by the primary borrower of the funds. Ideally, it is expected for the co-signer to possess a good credit score.

When you have a cosigner, it helps in improving the chances of car loan approval. It also helps significantly reduce the overall costs of auto loans by minimizing interest rates.

#Opt for a Budget Car

When you have a poor CIBIL score, it implies that you cannot apply for higher auto loan amounts. Opting for a for budget-friendly cars can help reduce the entire loan amount. When you are applying for a smaller loan amount, the lender might approve the auto loan -even with a poor CIBIL score.

#Consider Dealer Financing

Most auto dealers have links with pioneering lenders -including NBFCs and banks. This makes it easier for customers to ensure car loan approvals. However, one of the major demerits of the process is that loans obtained directly from dealers can be expensive. It is because interest rates tend to be higher. On the positive end, there are no strict eligibility criteria -allowing you to secure auto loans easily.

When you go ahead with the auto loan lender, as suggested by the dealer, it is recommended to conduct proper research by comparing interest rates and negotiating the terms of the loan.

Use the Car Loan as an Opportunity to Build the CIBIL Score

When you go ahead with paying your EMIs on time, you can improve your overall CIBIL score significantly in a span of the next few months. If you wish to avoid missing EMI payments, you can think of setting up the process of automated payments through a reliable software solution. In this manner, EMI gets deducted automatically from the bank account every month. This ensures that you never forget your payments.

Conclusion

When you wish to secure an auto loan with a poor CIBIL score, it will require research and planning. Ensure that you execute planning to accommodate the EMIs for your car loan easily within your monthly budget.

Are you in the market to purchase a brand-new car? You might as well need a loan to cover the overall costs. Car loans and personal loans are major financing options you can consider. Believing that you meet the existing lending requirements of these loan types, it is relatively easier to obtain them. At the same time, it is equally important to understand the difference between the two to determine the best choice.

There is no denying the fact that new cars do not come at a cheap price. Unless you have ample cash lying around to make the purchase, you need financial aid for the vehicle. With a significant amount in line, you might wonder which loan is the best option for you -a car loan or a personal loan. While you can leverage either of the loan types to finance your car, one could be a better option than the other in your case.

Through this blog we will cover the major differences between Car loan Vs Personal Loan.

What is a Personal Loan?

A personal loan is an unsecured loan that comes forth with a wide range of uses. Most people consider taking personal loans towards consolidating debts, paying for house repairs, and covering or upgrading car repairs. You can leverage personal loans for any type of expense -like financing your new car.

Personal loans are usually available with a higher rate of interest than car or auto loans as personal loans tend to be unsecured. Typically, you might not require making a down payment. Still, some lenders might charge an origination fee.

Also Read: How to Get a Personal Loan with a Bad CIBIL Score?

What is a Car Loan?

A car or auto loan is a type of secured loan that makes use of the car as collateral. This implies that if you end up falling behind on the payments, the lender might consider repossessing your car to fulfill its losses.

As the lender is guaranteed to be paid in one way or the other, it becomes less risky for them to loan the desired amount of money. Also, as it is less risky, lenders pass on the relevant savings to you through a reduced rate of interest -saving you significantly throughout the loan’s life.

Also Read: How Do You Get a Car Loan with a Low CIBIL Score?

Understanding the Differences Between a Personal Loan Vs Car Loan

What is the difference between a personal loan and a car loan? A personal loan is used for multiple purposes -even buying a car. On the other hand, a car or auto loan is specifically aimed at purchasing a car. Every loan type comes with its own pros & cons. Therefore, it is important to go through the requirements of both in detail before you sign the document and hire a personal loan agent.

Rate of Interest:

Personal loans tend to be unsecured. Therefore, the rate of interest can be higher in this case as there are higher risks involved in the process of lending. The payable interest rate on a personal loan varies depending on several factors -including your overall income, credit score, and others. The better credit score you have, the better chances you have of availing the loan amount of your choice at competitive interest rates.

With respect to car loans, the car purchased serves as collateral. When borrowers fail to repay the desired loan amount, the car will be then repossessed by the lender or the bank. The minimized risk of lending gets transferred to the borrowers in the form of reduced rates of interest.

Amount of Loan Offered:

It is recommended to select lending institutions that enable you to borrow around 100 percent of the total car’s ex-showroom price as personal loan. It is possible only when you have a decent credit score.
With a car loan, you can borrow up to 80 percent of the ex-showroom price of the vehicle. It is one of the main reasons why most people prefer availing a personal loan to cover the remaining amount that they require.

Loan Tenure:

For both types of loans, the repayment tenure tends to vary. An immediate personal loan offers you a repayment tenure of around 60 months. On the other hand, in case of car loans, most lenders tend to offer a repayment tenure of around 7 years.

When you have access to a longer repayment tenure, it offers the luxury of ensuring smaller investments. However, you will end up paying an increased amount of money as interest rates. A shorter repayment tenure will include larger installments along with a lower amount of interest rate.

It is recommended to select the option allowing you to pay the loan installments without making compromises on other types of financial commitments. You can leverage the functionalities offered by a reliable online EMI calculator -the one offered by Real Money Solutions. It allows you to check the EMI you are expected to pay for the respective loan amount and its subsequent interest rates.

The objective of the Loan:

There are several reasons to avail of a personal loan. There are no specific restrictions on the objective of borrowing the loan amount. The only exception is that the funds obtained from the loan should not be used for any illegitimate purpose.

On the other hand, you can make use of an auto loan solely for funding your car or vehicle. If you wish to combine your purchases with other expenses, it is recommended to turn to personal loans for maximum profits.

Ease of Loan Availability:

When compared, auto loans are comparatively easier to get access to. It is because your car serves as the collateral while reducing the overall risks of borrowing. It is important to pay attention to developing a decent credit score. Moreover, it is equally important to make sure that all your loan documents are in place to get your loan approved without any issues.  If you are interested in securing a personal loan without a pan card, you have to meet a strict eligibility criteria.

Procedures to Avail the Loan:

It is usually harder to ensure approval of a personal loan than a car loan. It is primarily because of the lack of collateral. When you apply for a personal loan with a poor credit score, it will end up attracting higher interest rates. Moreover, it can also result in the rejection of your loan application.

On the other hand, car loans can be easily availed without much heed to the credit score. It is because of the presence of your vehicle as collateral. Recently, the procedures to apply for both personal loans and car loans have become easier. With the constant rise in the number of reliable lenders including both banking and non-banking institutions, it has become a simpler process to avail loans. For personal loan approval, however, you might require access to more documents.

Also Read: Home Loan vs Personal Loan Which One Should You Opt for

Conclusion

The ultimate choice of either selecting a personal loan or a car loan for buying your new vehicle should be analyzed by considering several factors -like principal amount, loan tenure, the amount of interest, and the EMI amount. Personal loans are great options if you wish to get off with the total loan tenure soon enough with a minimal amount as the rate of interest. On the other hand, car loans are a great option if you are not able to pay a higher EMI amount every month and want to repay the desired loan amount over a longer span. You can check out the best available options with both banking and non-banking institutions at Real Money Solutions to compare different loan options.

As one of the trusted private money lenders in Mumbai,we offer a wide range of financial services including both personal and car loans in mumbai.