Friday, 5 October 2018

Will Low CIBIL Score Tow Away Your Car Loan?


Owning a car unlike in the past is no more a luxury. All young people want to buy a car for themselves as soon as they start working and those who already have vehicles are looking at upgrading their wheels or buying additional ones. All this love for cars is facilitated by easy availability of loans. Almost all financial institutions offer car loans at fairly easy terms. However for the loan to be sanctioned the applicant needs to comply with the eligibility criteria for the loan to be sanctioned.
Credit Score and Car Loan:
Like all loans car loans are sanctioned if the applicant meets the conditions laid down by the lender. There are various conditions that need to be met and one of them is a healthy credit score. A low CIBIL score indicates that the person has not been a responsible borrower in the past; this will obviously not inspire trust in the lender that the applicant has approached.
When you apply for a car loan, the first thing the prospective lender does is get the CIR of the applicant. Whether the application goes to the next step or not is determined by the credit rating of the applicant. So if your score is low does it mean that it is an end for your dream of getting a car or is there a way around it?
Does a Low CIBIL Score Tow Away Your Car Loan?
A low score is definitely not a good sign if you are looking for a car loan or for that matter any loan but there are steps that can be taken to deal with your situation.
  • Check Your CIR: The first thing you can do is a check your CIR before you apply for a loan. If your score is low then you should focus on identifying the reasons for the low score. There may be times when the score may be low not because of irresponsible credit behavior on your behalf but because there was some erroneous reporting by a lender, like there may be delayed payment which may have not happened or default on a loan which is not yours. You need to bring this to the attention of the rating agency that will get in touch with the lender to get the mistake rectified. This will take at least a month but if the score is low due to the mistake then you will see an improvement in your score and then you can apply for the car loan.
  • Work on Improving Your Score: If the score is low then it reflects irresponsible credit behavior on your part, in such a sceanrio you cannot look for a quick fix as a credit rating is built over time. However it is important that you identify the reason/s for the score being low and then work on improving them. This may take a while but it is better to wait for your score to improve rather than going ahead with a loan application with a low credit rating. A low credit rating means you have less choice in terms of which lender to approach and also that you may have to pay a high loan interest rate due to your score being low.
  • Get a Co-applicant: If you have a low credit score you can try and get a co-applicant to apply with you for the loan. However this will make sense only if the co-applicant has a better score than you. If the co-applicant’s score is as low as yours or lower then there will be no benefit in getting him/her as a co-applicant. Bothe applicants have to meet the eligibility criteria and other conditions as laid down by the lender and the applicant with the better score can become the primary applicant.
So a low score does not mean that your car dreams have to be towed away, there are ways that can help you deal with the situation. Hopefully one of the above ways can help you deal with a low score situation.









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