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

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.