Shopping around for your new vehicle is exciting, isn't it? So, why would you be so worried shopping around for the loan to pay for it? Of course, finding a car loan isn't as exciting but is equally important.
The decision to own a car should be well researched but not a difficult one to make as it is an asset that relieves you of your transport woes. With the numerous car options available in the market, it's quite easy to be an owner of the vehicle of your dreams. Car loans give you the flexibility to select an ideal car through our hassle-free, swift auto finance options.
Most buyers - especially the ones buying their first vehicle believe that obtaining a car loan via their auto dealer is a good idea. This could be one of the most common options but not the only one. When in doubt about an ideal way to auto financing, choose from our attractive finance options to enable an easier decision-making process.
You recently applied for a loan and got turned down. On enquiring, you were informed it was because you had a poor CIBIL Score. You don't need to despair. This article aims to empower you. We assist you with some Corrective Action Points and also some Sources of Funds you can access.
Here are some immediate corrective action points for you:
If you don't have a Credit Score (i.e. your Credit Report says NA/ NH) some banks may stay away from lending funds to you since you don't have a credit history which could make lending to you risky. You could start by applying for a credit card and repay the dues on time to build your Credit Score.
The above measures shall take time to take effect. If you have a poor CIBIL Score or you don't have one, you can tap into the the following sources for your immediate need of funds:
It's difficult to get a car loan without a CIBIL credit score. However, you could try and get a secured loan without a CIBIL score. Even if you have a bad credit history, the assets that you own provide sufficient security for the bank. You can get a collateral loan against Gold, Insurance Policy, FD or a PPF.
Loan from Co-operative/ smaller banks:
Of the 500 CIBIL members, 200 are co-operative banks who have access to your Credit Score. However, you could approach a small co-operative bank which may not be a member yet. Smaller banks provide loans of smaller amounts and lend at higher rates of interest. But the good news is that they are more likely to lend without checking your credit score.
Approach your company
Many companies have a loan policy for its employees. You could approach your HR Manager. If you have served a few years with your company, there is a good chance you can get access to some funds through them.
Leverage your steady income for a car loan:
You have a steady and growing income and have the monthly income statements to prove it. You should approach the bank where you have your salary account and try and get a car loan from them. Because of the long relationship you have with them, they could help you in your hour of need.
Reach out to your Family and friends:
Your immediate family and close friends could help you out of a sticky financial situation. They can assist you in the following ways:
Check the Credit Score of your spouse/ family members/friends. You could ask a person with a better credit score to jointly apply for a loan (be a co-signor). This increases the chances of your loan being sanctioned.
You could request a family member or friend to who has a better CBIL credit score to stand a Guarantor for the loan. This would enhance your chances of loan approval.
You could approach you friends and family for funds if you are in dire need of money. They may be ready to lend the money to you without any interest or at a nominal rate of interest.
A co- applicant/ guarantor will be held equally responsible for any default or delayed payments on your part. When a friend lends to you directly, his liquid funds reduce. Hence any support extended by your friends and family members to you would depend a lot on your reputation and your relationship with them.
Approach Private lenders
There are private lenders who could be approached if none of the above options work for you. They could however, ask for steep interest rates and the original title documents of the collateral you intend to provide.
Dip into your Emergency Fund
If neither of the above options work-out, you can break some of your FD's by paying some penalty. You should opt to do so only in real emergency situations.
Everyone faces financial hiccups. But you can still access credit while you work at building your Credit Score. Recently, banks have launched interest rate slabs that offer lower rates to higher CIBIL score. The benefits are significant considering 20 – 30 years of loan repayment.
How to calculate the amount of money to be borrowed for car/auto loan?
You need to calculate the amount of money required based on:
A few other banks may offer car loans for second hand cars as well and the amount of financing they are willing to offer again largely depends on the car's resale value and differs across banks/lending institutions.
It is important to have a clear understanding of Credit Information Bureau of India Limited (CIBIL) score in order to manage your finances well. CIBIL score is a three-digit numeric summary of your credit history. It is a number ranging from 300 to 900. A higher CIBIL score indicates a stronger credit profile and vice versa. A higher score also indicates greater ability to repay debts such as loans and credit card payments.
There are several myths associated with the CIBIL score. Following are five myths about it.
CIBIL score does not affect loan approval process
Banks and Non-Banking Financial Companies (NBFCs) carry out a CIBIL check before lending car loans, home loans, education loans, and vehicle loans, besides others. This helps them identify whether you will honor your obligations in future and repay your debts easily. You may, therefore, determine and rectify any discrepancies in your score before applying for a loan. Doing so will increase your chances of gaining a loan approval.
Having no credit will improve your credit score
There is a pre-conceived notion that having zero credit will improve your credit score. If you have not taken any credit in the past, lenders will not have any data to make a viable loan approval decision. This may affect your chances of obtaining a loan. It is, therefore, recommended to have some credit lines as and when you need finance to build a good credit score.
CIBIL score is beneficial to lenders only
This is another myth. A CIBIL score not only helps lenders in their loan approval decision, but also enables you to maintain financial discipline. You may take the necessary steps to improve your score. Make timely loan repayments or credit card payments as missed payments will have a negative impact on your score.
Running hard enquiries on CIBIL score is not an issue
Whenever you apply for car loan, car loan, travel loan, or any other kind of loan, the lender runs a hard enquiry. Running numerous hard enquiries could affect your CIBIL score negatively. This generally occurs when individuals apply for loans with multiple banks and NBFCs. Soft inquiries, on the other hand, have no impact on your credit score. Soft inquiries are CIBIL score checks made by you.
A low score means no credit availability
There are numerous lenders who have varying credit policies. Though some may not approve loans if you have a poor credit, certain other financial institutions may approve the application. However, it is important to know that lenders levy a higher interest rate and greater charges to those with bad credit. It is advisable to have a good credit score in order to get the best terms of the deal.
A CIBIL score identifies your ability to repay debts. In order to avoid rejection of a loan when you actually need it the most, it is imperative to get a clear understanding of all aspects related to the CIBIL score. This also ensures that you take corrective measures for building a strong credit score at the right time.
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