Availing a Car Loan with a Low Credit Score
If you have a low credit score, it doesn’t certainly mean that you cannot buy a new car or only get a car loan whose EMI would break the monthly budget. In India, it is generally recommended that you should have a CIBIL score of 700-750 or above to get the best deals on car loans.
But what if your credit score is low and you want to apply for a car loan? Use the tips mentioned below.
Look for a loan against FD
One of the simplest and most effective ways for people with low credit score to get an auto loan is to look for a loan against fixed deposit. As compared to a car loan from a bank, this method actually offers a number of benefits, like lower interest rate and less paperwork. This is because your fixed deposit works as a collateral and the lender is required to carry a lower amount of risk when granting you the loan. With this type of auto loan, the loan amount will depend on your FD and loan tenure.
Get the loan from a private financer
If a loan for car is rejected due to poor credit score, another great option is to take help of a private financer. The only drawback of this method is that the financers generally charge a higher interest rate as compared to banks. Some of the most popular private financers in India for auto loans are Mahindra Finance, Magma Fincorp, Sundaram Finance, etc.
Pay higher down payment
In several cases, if your credit score is not very bad, you can try to pay a higher down-payment. This will send a positive message to the lender that your financial problems are now over. Needless to say, they will surely consider your vehicle loan application. Some other factors that can help are excellent career graph and good annual income.
Don’t forget to shop around
Don’t just select the first lender who agrees to grant you a vehicle loan. If one lender is ready, there is a major possibility that another lender would approve your loan application as well and might offer you a better deal. So, make sure that you shop around for a while to pick the best deal on a new car loan.
Rather than being a luxury, owning a car is now a necessity. Just because you have a low credit score, it doesn’t mean that you wouldn’t be able to get fair deals when you apply for car loan. Use the tips mentioned above and ensure that you check the loan documents carefully to avoid any kind of discrepancies in future.
You may also apply for a Peer to Peer Loan
