Getting a car loan with low credit is tricky. Even if your car loan application is approved after loan providers perform a CIBIL score check, they charge you high interest rates, resulting in a bigger EMI and an increase in the total loan burden. Before applying for a car loan, you can use the CIBIL score app to check your score and see that the mentioned details are accurate and error-free. Is your low credit score holding you back from buying your dream car? Don’t lose heart.
The article will help you get approved for a car loan with bad credit. The article will help you get a car loan despite your low credit score. Repaying your dues on time is an excellent way to boost your credit score. Check the tips and tricks on getting approved for a car loan with bad credit!
Tips and Tricks for Getting Approved for a Car Loan with a Low Credit Score
Bad credit doesn’t imply you’re stuck with unaffordable loan deals. Being aware of the average rates and applying for pre-approval are two ways which can fetch you a budget-friendly car loan. Here are a few tips which can help you get approved for a car loan with bad credit:-
Know Your Credit Score and Work Towards Improving It
The higher your credit score is, the better your chances of getting approved for a car loan at favourable terms and rates. Performing a CIBIL score check before applying for a car loan is highly advisable. Ensure that your credit report is free from errors. If you see errors or discrepancies, contact credit bureaus and rectify them. For this, you can use the CIBIL score app. If you have some time, for example, six months to a year, you can work towards improving your credit score. Showcase good credit behaviour and refrain from taking new loans or opting for a new credit card account. Paying overdue loan EMIs and credit card bills, closing or consolidating current loans, etc., are ways to improve credit.
Save and Offer a Down Payment
If you have bad credit, down-paying for a car can boost your chances of getting approved for a car loan. Down payments can offset high-interest rates and reduce your loan-to-value ratio, helping you to be eligible for better and more favourable terms and conditions. Even though large down payments are better, loan providers might be willing to accept a down payment as low as 5%. The loan covers only 80% of the car’s cost. You have to pay the rest. A small sum can offset the price of purchasing a car. The more you save for a down payment, the higher your chances of getting a car loan.
Opt for a Budget Car
Bad credit means you won’t be eligible for high loan amounts with reasonable terms and conditions. It implies buying the latest sports car/SUV becomes impossible. Instead of a luxury car with premium features, you can opt for budget cars, compromising on the premium features that luxury cars have to decrease the total loan amount. When the amount you want to borrow is small, the loan provider may approve your loan application even with bad credit.
Apply with a Co-Applicant
Generally, you don’t require a co-applicant or guarantor to apply for a car loan. However, if you have a low credit score, consider applying for a car loan with a co-applicant. A co-applicant takes the loan with you. However, if you fail to repay the loan, your co-applicant will be liable for making loan payments. You can ask your family members, friends, or relatives to be the co-signer. Consider this option if you’re confident you can pay off the loan on time despite your low credit score.
Conclusion
Obtaining a car loan with bad credit needs precise planning. You are mostly to pay a high interest for your car loan with bad credit. Ensure to plan ahead to accommodate your car loan EMI in your monthly budget easily. Additionally, save for a larger down payment to decrease the loan amount and improve your eligibility for a car loan. With a bad credit score, getting a car loan is challenging but possible. A CIBIL score check with the help of the CIBIL score app will let you understand your credit score. If it is low, you can work towards improving it. Even if your credit score is low, be responsible and cautious about your financial habits, and with the right approach, you can get a car loan.
