CIBIL Score for Car Loan

As a car loan is a secured loan, the vehicle you purchase serves as a collateral. The risk associated with the loan is reduced for the loan provider. Thus, the CIBIL score requirement is quite lenient enabling you to get the required loan with a score of just 600. However, having a score of 750 or more is considered to be ideal for this loan.

Having a good CIBIL score can help you get better repayment options and lower interest rates. This can make it easier for you to manage the loan and help you save on the loan’s total repayment cost. 

A good CIBIL score for a car loan can be very important when you are looking to buy a car on loan. The score is essential for the following reasons: 

• Helps determine the loan amount: The CIBIL score for a car loan is proof of your creditworthiness. If you have a good score you can easily get a car loan of a more significant amount. Meanwhile, if you have a low CIBIL score, you will face difficulty in getting the desired loan amount.
  

• Affects the car loan application’s approval/rejection: While the score isn’t the sole factor for car loan approval, it can come into play if other eligibility criteria aren't fully met. In such cases, a lower score may influence the lender's decision or lead to lesser favourable terms.

• Determines the interest rate: If the applicant has a higher CIBIL score, it also reflects that he can hold greater financial responsibility. Therefore, there are chances that the lender would offer you the car loan at a lower interest rate. A good score gives you an upper hand when negotiating the interest rate. On the contrary, a low CIBIL score for car loans generally poses a risk for the lender, leading to a higher interest rate.

If you have a good CIBIL score, the bank/lender provides you with better access to special offers. These include benefits like low processing charges, zero down payment, etc. However, in the case of a low credit score, your loan requests can be denied or, if approved, would attract a higher interest rate. The required down payments may also be higher in such cases.

The following table shows how the CIBIL score affects your car loan approval:

Before applying for a car loan, it is important to check and maintain your score. To better manage your credit profile, you need to understand the factors that affect your score. Some of these factors are as follows:

• Payment History: Regular, on-time repayments boost your score, while missed payments lower it

• Credit Utilisation Ratio: Using less than 30% of your credit limit positively impacts your score

• Credit Mix: A good balance of secured and unsecured credit types improves your score

• Length of Credit History: A longer track record of responsibly managing your credit account helps improve your score

• Number of Credit Inquiries: Too many loan or credit card applications in a short period can lower your score

• Outstanding Debts: Large unpaid balances or defaults can reduce your score

• Recent Credit Behaviour: Taking out multiple loans quickly or not paying your dues on time can negatively affect your score