How Much Is Cibil Score Required To Finance Your Car?

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Your low credit score is bothering you, and if you think that it will come in between you and your dream car, then let us tell you that it is not so. As much eagerness, you are to buy a brand-new car, so are your dealer to sell you one. The one thing that certainly your high cibil score will do for you is that it will bring a low-interest rate on the credits. You need an average of 715 credit for getting a new car financed and 662 for a used car loan.

How Car loan rates vary due to the credit score?

Credit score rangesAverage Annual Percentage Rate for used car (%)Average Annual Percentage Rate for new car (%)
Super prime (781-850)4.34%3.68%
Prime (661-780)5.97%4.56%
Non-prime (601-660)10.34%7.52%
Sub-prime (501-600)16.14%11.89%
Deep subprime (300-500)19.98%14.41%

Is your score below 700? Get ready to explain

If your score is less than 700, then get prepared to solve the questions about negative factors on your credit record. Be prepared, and you should have a legitimate answer for them. Sometimes your ability to convince people can get you your desired loan at a relatively low-interest rate.

As you can take the loan for a low cibil score, but anything as low as 500 is a red light, and you need an earnest explanation. Your low cibil score means that you will not get a loan on an attractive rate of interest, but it certainly doesn’t mean that you can’t buy a car. 

What difficulty to expect in the lender’s office?

You need preparation for sure if you are so eager and concerned to get the approval. You should always focus on the positive factors of your finances while preparing. Remember, you have changes to get your loan cleared despite your low credit score. Always be paper ready, get all your documents like residence proof, cell phone bill, all payment histories that you have done on time, all insurances, and coverage details as these can get you your dream car. Some dealers have a special section to give loans to those with credit score challenges.

How your car loan can build your credit score?

Yes, it can improve your credit in two different ways:

Payment History: It is the track record of all your past bill payments records, and if you pay your bills on time, then it will highly improve your credit score as payment history constitute a large section of your credit score. Your payment record is reported to the three major credit bureaus by the traditional lenders. This data is used to calculate your cibil score. (the loans by buy-here-pay-here lenders don’t get reported to the credit bureau; hence they aren’t useful in improving your credit score. Credit mix: It is a mix of unsecured and secured loans and short-term or long-term investments. If you have both revolving credit (no set end date and variable payment like your credit card) and installment loans (paying EMIs), then both will be taken into account while calculating credit mix. If you use only credit cards and no installment loan, then getting a car loan will improve your cibil score.

If you are in no hurry to buy a car and can delay your car purchase, then you should wait and work on improving your credit score so that you can get your car financed at a low-interest rate.

You can improve it by:

You should always pay your EMIs on time pay your every bill on timely and keep credit card balances low relatively its limits not forget to cancel your dormant credit cards refrain from applying for too many loans very frequently always prefer for prepayments of your credits never take long term credits unnecessarily. Always keep an eye on your score.

So , we can sum up by the following :

Your low credit score will not come in between you and your dream car. As much eager, you are to buy a brand-new car, so are your dealer to sell you one. The one thing that certainly your high credit score will do for you is that it will bring a low-interest rate on the credits. You need an average of 715 credit for getting a new car financed and 662 for a used car loan.

If your score is less than 700, then get ready to explain the questions about negative factors on your credit record. Be prepared, and you should have a legitimate answer for them. Sometimes your ability to convince people can get you your desired loan at a relatively low-interest rate.

Your low credit score means that you will not get a loan on an attractive rate of interest, but it certainly doesn’t mean that you can’t buy a car. You need preparation for sure if you are so eager and concerned to get the approval. It would be best if you always focused on the positive factor of your finances while preparing. Remember, you have to make changes to get your loan cleared despite your low credit score. Always be paper ready, get all your documents like residence proof, cell phone bill, all payment histories that you have done on time, all insurances, and coverage details as these can get you your dream car.