How to Secure a Car Loan with a Low Credit Score
You want to buy a car for your convenience and are looking for ways to secure a car loan with a low credit score. However, you leap back when you look at your CIBIL score. But there is nothing to worry about 一 The Indian car loan industry is growing every day and is estimated to be worth $40.35 billion by 2029.
The good news is that you are not the only one financing a car using a vehicle loan, and there are avenues you can tap into even with your bad credit score.
In this guide, you will get to learn 5 different possible ways to secure a bad credit score car loan. Let’s dive in.
5 Ways to Get a Car Loan with a Low Credit Score
Here is how you can get a car loan with a low credit score:
1. Pay a Bigger Amount as the Down Payment
A down payment is the amount you pay at the start of buying a vehicle before you even secure a loan. The down payment is part payment of your car’s cost price and it reduces the loan amount you’ll need to secure to buy the car.
Let's say your desired car costs INR 10 lakhs and you pay INR 4 lakhs as the down payment. This lowers the total required vehicle loan amount to INR 6 lakhs. Besides, you also benefit by paying lower car loan interest due to the lower loan amount.
Even if you’ve got a bad credit score, you can be eligible for shorter auto loan amounts by paying a larger down payment.
2. Use a Cosigner or a Guarantor
Another strategy to get a car loan with a low credit score is to approach another person, who could be a friend or relative but who has a higher credit rating. The good thing about this is that your car loan financer will be sure that your loan will be repaid by your guarantor if, by chance, you personally face a repayment challenge.
Also, you can use this guarantee to get a loan at better car loan terms. Let's say you have a low CIBIL score, but you get a guarantor whose score is greater, for example, over 750. This raises your chances of getting better terms and car loan interest rates.
However, it is good practice to let your cosigner know about all the financial commitments involved before they agree to guarantee you. And, keep their trust by paying all loan EMIs in time.
3. Showcase Your Income Proof
You need to prove your repayment capacity for the loan amount you need, which goes beyond a bad credit score. A consistent income source or stable employment can help your financer trust you and give you a car loan with a low credit score.
So, keep the proof of your income ready, including your bank statements, ITR statements, salary slips, business invoices, and rental income receipts. These proofs will boost your credibility and help you secure a car loan.
4. Get a Loan From a Non-Banking Financial Company (NBFC)
When you want a car loan with a low credit score, NBFCs are better than banks and other financial institutions. Their credit terms and car loan eligibility criteria are not that strict. Though you may pay a higher car loan interest rate than bank loans to cover the risk, your car loan will be approved faster with fewer credit score demands than through a bank.
For example, we at SK Finance are flexible with our loan terms and understand your need for a new or a used car loan. Whether you have an existing debt or a low credit score, we'll evaluate your car loan eligibility based on your income and repayment capacity to customize a befitting financing solution to finance your dream car.
Here’s a list of our car loan schedule charges:
We’ve helped many salaried individuals, farmers, taxi drivers, and self-employed professionals secure a car loan even with a low credit score. You can be the next one to buy your dream car with our easy and flexible loans.
5. Pay Off Your Existing Debts
When you pay your current debts, you raise the chances of financiers approving your car loan. Before the lender approves the loan, they will check how much debt you have and compare that with your monthly income, which is called the debt-to-income (DTI) ratio. It shows how much money from your income you use to pay debts.
So, when you pay up your existing debts, you lower your DTI ratio, and car loan providers will see that you are committed to improving your financial standing. In addition, you free some of your income, which you can use to pay for your car loan.
You should take the right steps to make your credit score better. To do this, ensure you:
● Pay all your loans or credit card bills on time to regularize your payment history.
● Don't spend more than 30% of your available credit limit.
● Limit additional requests for new credit until you clear some of your existing debts.
● Review your credit report for any errors and have them corrected.
Ready to Bring Your Dream Car Home?
When looking for a car loan with a low credit score, ensure your vehicle loan requirements are in tune with your personal needs and financial standing.
Here at SK Finance, we are leaders in providing personalized car loans that align with your financial status and repayment needs. Our auto loan services are flexible and transparent and support our customer's borrowing experience. Visit us at your nearest nearest branch to secure a car loan today even if you have a bad credit score. We won’t judge you for one past mistake.
