Impact of CIBIL Score on Your Car Loan Application
Buying a car is going to impact your finances due to the expenses associated with insurance premiums, Equated Monthly Installments (EMIs), fuel, and maintenance. Many people in India seek a car loan to fulfill their dream of owning a vehicle.
Cars have become a utility product in the present era, and the convenience of owning one cannot be described in words. However, getting car finance is not as simple as it seems.
Lenders look into various aspects to determine your financial soundness before providing you with the funds. A car loan is less risky for the lender, as you mortgage the vehicle with the financial institution. So, in case of default, the lender will take possession of the vehicle to recover the dues. Despite all this, lenders still check your CIBIL score before sanctioning your loan application.
A CIBIL score is a three-digit number that depicts your creditworthiness, which is derived from your credit history. Factors like repayment of previous loans, loan tenure, and loan amount play a crucial role in determining your credit score. This score has a range from 300 to 900. Having a CIBIL score greater than 750 will help you get a faster loan approval.
What if it is your first loan and if you do not have a credit score?
If you are new to credit, do not worry. By following a few essential tips you can develop a positive credit score in the next two to three years. These include:
- Do not default on your EMIs
Your inability to pay the EMIs on time will compel the financial institution to give you a negative rating, which can affect your CIBIL score.
- Ensure that you have the right credit mix
It is advisable to strike the correct balance between your secured and unsecured loans. Remember, if you have too many unsecured loans, lenders will view your case negatively.
- Check your credit history periodically
Monitor your CIBIL score and make sure that it is going in a positive direction.
Do note that getting a high credit score will require effort and time. A high CIBIL score will ensure that you get quick access to car loan. You will get a quick approval on your car loan application.
Now that you understand the relationship between a car loan and CIBIL score, ensure that you repay your debts on time so that there is no hindrance in achieving your future financial goals.
Once you have a good credit score, you can check car loan eligibility from a reliable lender like Mahindra Finance. Visit its website to learn about its offerings.