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Every individual has a dream of owning a car but not many can afford one easily. Car loans help individuals realise their car dreams. Not only do they help in owning a car but also allow sufficient time to repay the borrowed amount through affordable instalments. However, there are a few pre-conditions, which have to be fulfilled before sourcing a car loan.
In India, the primary eligibility criteria for availing a car loan include a minimum age of 21 years, a minimum monthly salary requirement and reasonable credit history. A good credit history comes from a having good credit score, which can very well be the deciding factor as far as acceptance or rejection of a car loan application is concerned. So, what is considered a minimum CIBIL™ score for car loans in India? Read on to find out more about this.
Very often, individuals are surprised to find that their car loans are rejected due to a poor credit score. Also, not many are aware of the need for credit score for car loans. In this article, we explain what is a good credit score to buy a car and also share tips on how to improve your credit score to qualify for a car loan easily.
Credit scores are assigned by various credit authorities like CIBIL™. It is one of the four authorized credit bureaus in India which provide a credit score, the others being Equifax, Experian and CRIF High Mark. CIBIL™ Score ranges from 300 to 900 and the higher your score, the better your chances of getting a loan.
First, things first - While, there is no defined minimum credit score for a car loan, it’s always good to have a high credit score. In general, it is advisable to have a score of 750 or above to stand a good chance of being approved for a loan and to secure the best interest rates on it.
Additional Reading: What Is A Good CIBIL™ Score For Car Loan
Yes, if you have a poor credit score, it is still possible to avail of a car loan as the banks hold the car as security collateral until you repay the full loan amount with interest. While you can get a loan without a CIBIL™ score note that it can be a lengthy process and far more difficult to get loan approval. Moreover, you might only be offered unattractive terms and conditions on your loan. Some of them may include a higher interest rate or a shorter repayment period.
With a good CIBIL™ Score for a car loan, you can get a lower interest rate, longer repayment period, larger loan amount and simpler documentation.
Here are some of the reasons why your CIBIL™ score is poor and also suggested ways to improve the same:
While there is no set minimum CIBIL™ score for car loans it is recommended that you have a score of at least 750 before you apply. This will help in avoiding potential loan rejections and to secure the best deals on car loans.
You can easily check your credit score for free online. All you need to do is, register with a trusted website like CreditMantri and check your credit score by following the guidelines. CreditMantri provides your latest credit score for free with just a few clicks.
You can also check your CIBIL™ score through CIBIL™ Credit Information Reports. This can be helpful before applying for a car loan. It is currently a paid service and the charges for the same are Rs. 470 for obtaining the report. The steps to be followed are:
A good credit score requires consistency in good credit behaviour. Some activities can help in keeping the credit scores in good health. Here, we have listed them for your reference:
When you apply for a car loan with a good CIBIL™ score, you can enjoy many associated perks like attractive interest rates, longer loan tenure, etc. As credit scores are becoming the main criteria for granting all forms of credit, it may seem impossible to get a car loan without a credit history. However, some financial institutions do consider car loan applications without a credit history but provide the loan at higher interest rates.
Even if you meet all the eligibility criteria for a car loan, a poor CIBIL™ score could be a hindrance in owning your dream car. A good credit score also means better interest rates. Therefore, it is important to take extra care of building, maintaining or remediating your credit history as needed.
1. What is a CIBIL™ score?
A CIBIL™ score is a 3-digit number presented in your credit report and reflects your credit performance over a period of time. It ranges between 300 and 900. The score acts as a measure of your creditworthiness. The higher the score, the higher the chances of getting a loan application approved easily. A good credit score is anything above 750.
2. What is a good CIBIL™ score for a car loan?
Typically, a CIBIL™ score of 750 and above is considered a good score for easily getting a car loan.
3. What is the minimum CIBIL™ score for a car loan?
The minimum CIBIL™ score to qualify for a car loan varies from lender to lender. most lenders do not have a minimum criterion. But, if you have a low credit score, then you are likely to be charged higher interest rates on the loan amount.
4. Can I get a car loan with a 600 CIBIL™ score?
Yes. It is possible, to get a car loan with a low credit score. But the downside is that you are likely to be charged a higher interest rate compared to borrowers with an excellent credit score in the range of 750 and above.
5. How do I improve my credit score?
You can improve your credit score through anyone of the following ways:
6. Will I get a car loan if I have a low credit score?
Yes, you can get a car loan even with a low credit score. However, you will have to showcase to the lender that you have a stable source of income. Additionally, you may also have to arrange a guarantor or opt for a lower loan amount with shorter loan tenure.
7. What if there is an error in my credit report?
In case you find an error in your credit report, you should immediately raise a dispute with the credit rating agency. If an investigation follows, you must also inform your banks and other credit providers about the same.
8. Is CIBIL™ score important for a used car loan?
Lenders use your CIBIL™ score to check your creditworthiness and hence it is important for both new and used car loans.
9. Will my CIBIL™ score affect the interest rate of a car loan?
Yes, the CIBIL™ score can affect the interest rate of a car loan. A high credit score will have a lower preferential interest rate on a car loan.
10. What is the minimum CIBIL™ score for a car loan in Axis Bank?
Axis Bank has not specifically mentioned a specific credit score for qualifying for a car loan. The eligibility criteria for a new car loan from Axis Bank is:
While there is no minimum credit score eligibility for car loans at Axis Bank, having a high credit score of 750 and above can help you secure the best loan deals.
CIBIL™ Score for HDFC Car Loan
CIBIL™ Score for ICICI Car Loan
CIBIL™ Score for SBI Car Loan
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