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TransUnion Credit Information Bureau (India) Limited (CIBIL) is the oldest credit information and insights company that was established in the year 2000 in India. The aim of the organization is to gather information from credit institutions across the country such as banks and non-banking financial companies (NBFCs). This information is used by the organization for Credit Information Report (CIR) such as CIBIL report for borrowers.
Your CIBIL report is generated on the basis of handling of credit cards and loans. Not only this but also your CIBIL score explains how well you have handled your previous credit by assigning a rating ranging from 300 to 900. To get your car loan approved, your CIBIL score should be at least 750.
To obtain a car loan, you should qualify certain eligibility criteria like your minimum age limit should be at least 21 years, having a regular source of income, as well as having a strong credit history. If you have a strong CIBIL score, the chances of getting your car loan application approved is higher.
It is often observed that when someone approaches a bank to finance their dream car, their loan gets rejected despite meeting most eligibility criteria. One of the reasons for a bank to reject a car loan is a bad credit score i.e, a score that is below the minimum requirement. This leaves applicants confused as to why they have a low credit rating.
Here are some of the reasons for a poor credit rating.
The following are the top five things that you need to remember while applying for a used car loan:
You should always look out for the best deal. Never decide on the lender as each lender will offer you a different deal. Avoid taking the first loan that is offered to you and try to compare interest rates with various lenders. In today’s digital age, you can even compare and scout for exciting deals online that are suitable to your needs.Ensure weighing all the offered deals and then take the final decision.
The EMI aspect of the loan for used car can sometimes get tricky and confusing as it is not as simple as Principal + Interest. In addition to the EMIs, also has several other components such as the penal interest, annual maintenance and EMI bounce charges. Make sure to take into consideration all these factors while calculating the actual EMI instead of only the interest rate.
A credit score is a numerical representation of an individual’s credit worthiness. It ranges from 300-900, 900 being the highest. The credit score is computed by the credit bureaus in the country by taking into consideration your current financial status and historical financial data. Generally, a CIBIL credit score of 750 and above is considered as ideal by lenders like banks and non-banking finance companies. Even if you have a low CIBIL score, some banks will still be willing to offer you credit. It is a good practise to check your credit score from time-to-time as it gives you an idea of your credit status. There are several simple ways to improve your credit score like paying bills on time, limiting credit usage, not closing old credit accounts and so on.
First of all, you must realise that once your EMI is paid, you should have enough money left over to cover your other monthly obligations. Therefore, it is best to keep your monthly EMI below 30% of your gross income. The longer the duration, the cheaper your EMI will be automatically, but you will pay substantially more in interest over the course of the loan. On the other hand, a shorter EMI produces better savings, but you must make larger monthly payments. As a result, you should be aware of your monthly needs and choose your EMI term accordingly.
You can either pay a large amount of down payment and go for a loan with a shorter tenure and avail lower interest rates. If you have funds to pay for your used car in cash, especially if the interest you are receiving from your bank is lower than what you could end up paying as interest to the lender, the second option is to make a larger down payment and avail lower interest rates or shorter tenures on the loan.
Hope the aforementioned points will help you take a sound decision before finalising the loan and signing the agreement. Make sure to double check the terms and conditions of the loan forms carefully. You can even take advice from financial experts regarding the loan paperwork. It is better to be cautious beforehand than dealing with the issue later.
CIBIL has provided an online facility to help potential borrowers check their Credit Information Reports before they apply for their car loans. It is a paid service; currently Rs.550 is charged to obtain the report. The steps to follow in this case are:
After the application process is complete, they will get in touch with you and inform you of your exact credit score.
Banks and financial institutions never announce what the perfect score for a car loan would be. However, it is safe to assume that a score of over 600 is good and a score of 750 upwards is more favorable.
Like with everything else even CIBIL Reports require constant maintenance. There are certain activities that you can indulge in to keep credit scores looking good. There are also some activities that need to be avoided in order to prevent negative effects to the credit score.
Some of the ways to improve your CIBIL score are as follows:
There are no quick tips through which you can build your CIBIL score instantly. It is an ongoing process where you have to follow the above mentioned steps and you will notice the improvements within a few months.
Yes, with a low credit score, it is still possible to obtain a car loan. The drawback is that, in comparison to borrowers with great credit scores in the region of 750 and above, you are probably going to pay a higher interest rate.
You can take various steps to keep it on the safer side. You can make all your credit card payments on time or take a minimum number of loans in your name.
The minimum CIBIL score required for being eligible for a quick and streamlined car loan approval process is 750. Besides, lenders may also evaluate other parameters like monthly income, number of existing loans, income to debt liability ratio, etc. to assess car loan eligibility.
Getting a guarantor is one of the options you can explore if you have a low CIBIL score. The guarantor may be anyone from your friends or family with a good CIBIL score. In such car loan applications, your guarantor’s CIBIL score will be evaluated during the car loan approval process.
Yes, a CIBIL score of 750 is considered good to avail a car loan.
CIBIl score is often considered the very first parameter to check an individual’s credit worthiness. That is why it is of importance while applying for a car loan.
Yes, CIBIL score can affect the interest rate of car loan. Generally, a high credit score translates to a lower preferential interest rate on a car loan.
The eligibility criteria of getting a car loan varies from banks or lenders. The CIBIL score shows a higher income vs debt-liability ratio, and a strong credit history which the lenders take into account before approving car loans.
If you are a CIBIL defaulter and you want to apply for a car loan, the loan amount will be decided on the basis of a collateral presented to the bank or NBFC against the loan.
| CIBIL score looks good? Apply and choose between best Car Loans in India |
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TransUnion CIBIL is one of the leading credit information companies in India. The company maintains one of the largest collections of consumer credit information in the world. CIBIL Score plays a key role in the lives of consumers. Banks and other lenders check the CIBIL Score of the applicants before approving their loan or credit card application. Consumers can visit the official website of CIBIL to check their CIBIL Score and Report. CHECK YOUR CIBIL SCORE now.
Display of any trademarks, tradenames, logos and other subject matters of intellectual property belong to their respective intellectual property owners. Display of such IP along with the related product information does not imply BankBazaar's partnership with the owner of the Intellectual Property or issuer/manufacturer of such products.
