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  • CIBIL Score for Car Loan

    The usual qualifying conditions for obtaining a car loan include things like having to be at least 21 years old, making a certain minimum monthly salary, and having a decent credit history. A solid credit history is related to a good credit CIBIL score, which is frequently the determining factor in whether a car loan application is approved or denied.

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  • CIBIL Score for Car Loans

    The Credit Information Bureau (India) Limited (CIBIL) is an organisation that was set up in the year 2000 for the purpose of collecting information about a person’s loan and credit cards and maintaining a record of the same for the purpose of developing a database of borrowers. It creates this database by collating information received from banks about a person’s borrowing and payments towards loans and credit cards.

    Once the information is collected, it is aggregated and processed to relate to a number that ranges from 300 to 900. The minimum CIBIL score for car loans accepted by most banks is 750.

    CIBIL Score and Applying for a Car Loan

    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.

    • Late payments: If payments towards credit cards or loans are delayed time after time, it works to lower credit scores as it points to improper financial management.
    • Overdue credit cards: Even though credit card companies only require a monthly minimum amount to be paid to avoid late fees, the balance amount outstanding is still considered overdue. Consistently rolling over dues by paying only the minimum amount lowers CIBIL scores.
    • Defaulting on payments: Failing to make payments towards any line of credit i.e. credit card, loans or overdrafts etc. also constitutes improper financial management which, again, serves to lower credit scores.
    • Rejected loans: If a car loan has been rejected and another one is applied for immediately after said rejection, the second loan also stands a high chance of being rejected which also leads to lower credit scores.
    • Too many car loan applications: If applications for car financing is made to multiple finance houses at the same time, they all end up requesting for the customer’s CIBIL details at the same time. This is viewed as a negative aspect and works to lower credit scores.

    Top 5 Things to Remember While Applying for a Used Car Loan

    There are a few things that you need to consider when for a used car loan. They are as follows:

    1. Browse and compare deals

      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.

    2. Learn about the EMIs

      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.

    3. Periodically checking your credit score

      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.

    4. It is better to opt for lower EMI for a longer period

      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.

    5. Analyse other payment options

      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.

    How to Check your CIBIL Report

    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.470 is charged to obtain the report. The steps to follow in this case are:

    1. Apply for your credit score on the CIBIL website.
    2. Enter basic information like name, identity proof details and date of birth.
    3. Provide relevant contact information.
    4. Make the payment to complete the process.

    After the application process is complete, they will get in touch with you and inform you of your exact credit score.

    What is a Good CIBIL Score for a Car Loan?

    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.

    Do’s and Don’ts for Good CIBIL Score

    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.

    • Do’s
      • The simplest thing to do to avoid damaging your credit history is to ensure all payments are made on time.
      • Keep loans to a minimum because too many lines of credit can strain your income and result in rejection of subsequent loans.
      • Make sure you check your CIBIL score yourself, because, if too many financial organisations check it on your behalf, it lowers the score.
      • Make sure you pay credit card bills in full. Paying just the minimum amount doesn’t prevent the remaining amount from being considered as overdue.
    • Don’ts
      • Don’t take too many loans because it points to mismanagement of finances.
      • Don’t max out credit cards as that too means that you are unable to live within your means and find managing personal finances difficult.
      • Don’t default on payments. Defaulting on payments gets recorded in the credit history and can haunt you for a long time.

    Ways to improve your CIBIL Score to avail yourself of a car loan:

    Some of the ways to improve your CIBIL score are as follows:

    • Keep track of your credit score and credit report, being aware will help make better decisions
    • Check your credit report for the mistakes or errors from your end and rectify those errors
    • Avoid applying for any new credit requests within a short period
    • Try to settle your outstanding dues or default payments at the earliest
    • Ensure paying all your credit bills and due EMIs on time
    • Try to limit your credit card spending to less than 30% of your credit limit is considered a good habit to build a decent credit score

    You should keep in mind that there are no quick fixes or hacks to improve your credit score within a short period as it is an ongoing process that will take time and effort to fix. However, you can expect to see results within a few months of time.

    FAQ's on CIBIL Score for Car Loan

    1. What is the minimum CIBIL score required to avail a car loan?
    2. The minimum CIBIL score required to avail a car loan is 750 and above.

    3. Can I get a car loan with a credit score of 600?
    4. 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.

    5. How to make sure my credit score stays on the safer side?
    6. 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.

    7. Is CIBIL score checked for car loan?
    8. 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.

    9. What should I do to avail a car loan if I have a low CIBIL score?
    10. 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.

    11. Is CIBIL score of 700 considered good to avail a car loan?
    12. Yes, a CIBIL score of 700 is considered good to avail a car loan.

    13. Why is CIBIL score so important while applying for a car loan?
    14. 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.

    15. Can CIBIL score affect the interest rate of car loan?
    16. 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.

    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.

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