Buying a car is an expensive affair, regardless of whether it is a brand new one or a repurchase, and that is why many buyers opt for a car loan. While some lenders may offer a loan for the full ex-showroom price, others may only offer a loan up to 80% of the car value. Hence, before applying for a loan, make sure you do your groundwork and are clear about the total loan amount you actually need, hidden costs, interest rates, and repayment terms and conditions across lenders.
During the car loan underwriting process, lenders look at various factors when deciding on a loan applicant’s credit-worthiness. Now, one of the most important factors is your CIBIL Score and Report. A high CIBIL Score of 750+ is an added advantage in getting you a faster, easier car loan approval. Banks and lenders prefer consumers with a high score as this indicates a credit-conscious individual — someone with a good credit history and positive repayment trends. After all, past credit behavior is a strong indicator of future credit habits, and lenders want to ensure they are approving loans to responsible individuals who will repay the loan on time. Since CIBIL Score is an integral factor in the car loan application process, you should know your CIBIL Score before applying for a loan.
In addition to your CIBIL Score and Report, there are other factors that may affect your car loan application. A stable job and a steady monthly income serve as reassurance to the lender that the consumer is capable of repaying the loan over the entire loan tenure. Another trustworthy indicator is your credit capacity as indicated by your EMI to Income ratio. This compares your existing loan EMIs to your net monthly income and helps lenders gauge your financial obligations and repayment capability. If your EMIs are within 30% of your net monthly income, lenders will view this positively.
Now, what if you have a low credit score or if you are new to credit and do not have a CIBIL Score yet? Having a low score does not mean you cannot get a loan. Instead, work towards a high CIBIL Score before applying for a loan. Here are a few steps that can help you achieve a higher score and a positive credit footprint:
Always remember that a high CIBIL Score takes a bit of time and effort. Eventually, a high score will go a long way in getting you access to credit, not just for your car loan but for other financial goals too.
Stay credit-ready by monitoring your CIBIL Score & Report.
Disclaimer: The information posted on this blog (Information) is prepared by TransUnion CIBIL Limited (TU CIBIL). This Information is for generic informational purposes only and is meant for consumer education and awareness about credit scores, credit history and credit reporting. The Information posted on the blog does not constitute credit advice and the user will need to consider the same and take independent informed decisions . No part of this Information may be quoted out of context, distorted ,distributed, published and/ or reproduced in any form and manner whatsoever. Consumers are advised that the Credit Information Reports (CIRs) prepared by TU CIBIL are based on collation of information, substantially, provided by credit institutions who are members with TU CIBIL. TU CIBIL is not responsible and /or liable for errors and/or omissions caused by inaccurate or inadequate information submitted to it by credit institutions. TU CIBIL does not guarantee the adequacy or completeness of the Information and/or its suitability for any specific purpose nor is TU CIBIL responsible for any access or reliance on the Information. TU CIBIL expressly disclaims all such liability. Further, this Information is based on the data available with TU CIBIL at the time of publication and therefore may not be up-to-date.