Having a good credit score is crucial when applying for any type of loan, including a car loan. A high credit score not only increases your chances of loan approval but also enables you to secure lower interest rates and better loan terms from leading banks and Non-Banking Financial Companies (NBFCs). However, it is essential to understand what constitutes a bad credit score when seeking a car loan. In this article, we will explore the significance of a good credit score for a car loan and how the Bajaj Finserv Credit Pass can help individuals build a strong credit history.
Relevance of good credit score for car loan
A credit score is a three-digit numeric representation of an individual's creditworthiness, and it plays a vital role in determining loan eligibility. This score, often referred to as the CIBIL Score, is based on an individual's credit history, including their repayment behaviour and management of loans and credit cards. It ranges from 300 to 900, with a higher score indicating a stronger credit profile. An ideal credit score is typically considered to be above 750, increasing the chances of loan approval and favourable terms.
Apart from improving loan approval chances, a good credit score also opens doors to special offers and benefits. These may include zero down payment options, lower processing fees, and reduced interest rates, providing individuals with a cost-effective and convenient car financing experience.
Car loans with a low CIBIL Score or no credit history
While a good credit score is highly desirable for obtaining a car loan easily, having a relatively low credit score, such as 650 or below, does not automatically disqualify you from getting a car loan. Lending institutions do not have a minimum CIBIL Score requirement for car loans, but a low score may result in loan offers with higher interest rates or a higher down payment requirement.
Moreover, having no credit history, indicated by NH/NA on a credit report, does not make you ineligible for a car loan. Lenders consider several factors to determine your eligibility in such cases:
- Income: Demonstrating a stable source of income through salary slips, Form 16, or profit and loss statements can significantly increase the chances of loan approval. These income proof documents showcase the individual's ability to comfortably make monthly loan repayments.
- Loan amount: With a low credit score, the risk of default on a car loan is perceived to be higher. To improve your approval chances, you may opt for a lower loan amount and a higher down payment.
- Co-applicant/ guarantor: Applying with a co-applicant who has a better credit score and a stable income can enhance your chances of loan approval. Alternatively, individuals may also consider obtaining a guarantor who can provide additional assurance to the lender regarding the repayment capability.
Building a good credit score for car loan with Bajaj Finserv Credit Pass
A bad credit score for a car loan typically falls below 650, although there is no defined minimum score requirement set by lending institutions. Bajaj Finserv Credit Pass offers a unique opportunity for individuals to improve their creditworthiness and chances of car loan approval. It provides a personalised dashboard with real-time credit health updates, monthly CIBIL Score checks, and interactive tools that enable you to make smarter financial decisions.
With the Bajaj Finserv Credit Pass, you can make timely repayments, keep your credit utilisation in check, and build a positive credit history. This, in turn, enhances your chances of obtaining a car loan with favourable terms, including lower interest rates and flexible repayment options.
