Driving your own car is a dream of all and thanks to the loan facilities that fulfill this dream of most of the people in India. A car loan helps one to purchase the car whenever he/she wants, however, the bank does not offer loan to everybody. There are certain requirements that one has to fulfill before taking the loan for buying a car.
The basic criteria to avail the car loan by any financial institution like Bank is to be of age 21 years, have a certain monthly income, and a good credit/ CIBIL score. A good CIBIL score is most of the times the most essential deciding factor as it shows the creditworthiness of an individual and tells whether he/she will be able to repay the loan on time or not.
CIBIL is basically one of the 4 authorized credit information bureaus of India which gives credit report of an individual or company that contains credit score. The other tree credit bureaus of India are Experian, CRIF, and Equifax. The credit score given by CIBIL Company is considered as CIBIL score.
The credit score provided by CIBIL ranges from 300 to 900. The higher the CIBIL score the better it is considered for loan approvals. Generally, for a car loan credit score or CIBIL score considered good by most of the financial institutions such as Banks is 750 or more.
Sometimes when a person approaches some bank for a car loan, it gets rejected, and the main reason for the same is poor CIBIL score. Here we are mentioning some of the reasons behind poor credit score:
- Overdue Credit Card Bills: Even though the companies offering credit cards only ask for a monthly minimum amount to pay for avoiding late fees, but the balance amount is considered overdue in any case. Continuously paying only the minimum amount out of the overdue on credit card lowers the CIBIL/ credit score.
- Late Payments: Consistent late loan and credit card payments lower the CIBIL score as well.
- Many Applications for Car Loan: If one makes car loan applications to various financial institutions at the same time, then all these institutions ask for a person’s CIBIL score at the same time. This again lowers the CIBIL score.
- Unapproved Loans: If a loan for a car is rejected before, and the second loan is applied immediately after the rejection, then the second becomes more likely to get rejected again. This scenario also leads to low CIBIL score.
Keeping these points in mind and applying for a car loan increases the chances of its approval. The reason for the same is the high CIBIL score when one keeps the above points in mind.
How to Check the CIBIL Score?
In order to predict whether the car loan will be approved or not, it is necessary to know the CIBIL score. So, here are the steps to check the CIBIL score online:
- Step 1: Go to the website of the CIBIL score and apply for credit score.
- Step 2: The user then has to provide his/her basic details such as his/her details of id proof, name, and date of birth.
- Step 3: Provide other relevant and required information.
- Step 4: The final step is to make the payments towards this process.
After completion of this process, the CIBIL company gets in touch with the user and gives his/her credit score.
What is Considered as Good CIBIL Score While One Applies for Car Loan?
Generally, the financial companies and banks do not announce anything like a good credit/ CIBIL score. However, any CIBIL score that is more than 600 on the scale of 300 to 900 is considered favorable for car loan approval.
How to Get a Car Loan without CIBIL Score?
Taking a loan with a good CIBIL score attracts many perks, such as low-interest rates, etc. Since CIBIL score is one of the deciding factors for a car loan, but some financial institutions offer car loans even without CIBIL score, however at the higher interest rate.
The reason for the same is the security of car loans with the vehicle and thus the lenders think car loan approval with bad CIBIL score or no CIBIL score as less risky.
However, if one wants to enjoy the good interest rate and other perks related to a car loan, having a good CIBIL score is mandatory.
What Should One Do and Avoid in Order to Have a Good CIBIL Score?
Things to Avoid:
- It is advised to avoid many loans at the same time as it leads to mismanagement of the finances.
- Try not to become defaulter of payments. This is because payment defaulting gets recorded in the credit/ CIBIL report and can behind one for a long time.
- Do not overdo the limit of the credit card.
Things to Do to Improve CIBIL Score:
- Paying all the loans and credit card bills on time is the first thing that one should do in order to improve his/her CIBIL score.
- One is suggested to pay his/her full credit card bills at once. This is because paying only the minimum amount does not prevent one from the overdue.
- Do not reply much on loans and credit cards. Keep these things as minimum as possible.
- Check the CIBIL score regularly and by self, as many financial institutions checking it may lower the score in the long run.