Will You Pay More Interest on Your Car Loan If You Have A Bad Credit Score?
A credit score is a numerical expression that is completely dependent on a level analysis of a person’s credit files. It is used to represent the creditworthiness of an individual. It is mainly based on a credit report made by credit bureaus. Lenders such as banks and credit card companies use credit scores to determine who qualifies for a loan, at what rate of interest, and what credit limits. Banks also tend to approve car loans and personal loans for individuals with a good credit score easily.
If you too want a car loan, you can use the car loan calculator app to check your monthly payment amount and other payment-related information.
An individual should ideally have a credit score above 750 to apply for a car loan, and banks generally avoid disbursing car loans to individuals having a low credit score. So, if you have a low credit score or zero credit history. Then, this article can be very useful for you, as we discuss the tips to get a car loan with a bad credit score.
Tips For Getting A Car Loan With A Bad Credit Score
Most people have either low credit scores or no credit history. But that doesn’t mean you won’t get a car loan. As such, lenders have introduced new methods through which they can provide funding to individuals having a bad credit score. You can also try taking loans from the private sector as they don’t focus on credit scores much.
1.Check Your Car Loan Eligibility
Getting a car loan with a low credit score can be costlier compared to people having a good credit score. You can get a free credit report from any of the credit bureaus of India. If you contain a bad credit score, try to improve it before applying for a loan or taking a loan by giving 60% of the amount as a down payment. You can also go for a settlement for your existing debts to increase your credit score.
2. Volunteer To Make A High Down Payment
When you make a handsome down payment on your car, the total cost of the car loan decreases. As a result, your chances of getting a car loan with a low credit score increases. A high down payment also means low processing fees and less interest payment.
3. Avoid Taking A Loan From Your Profile
Try taking a loan by creating a new profile of any of your house members. A no credit history is far better than a bad credit score.
4. Apply For A Pre-approved Loan From Your Bank
Some banks offer pre-approved loans to their existing customers based on their KYC paperwork. Any individual with a bad credit score can also get a car loan in these cases.
5. Opt For A Model That Fits Your Budget
Having a low credit score means getting high loan amounts. In short, there are high chances that you won’t be able to buy premium cars. It would be useful if you went for an ordinary car so that the loan amount becomes smaller and it becomes easy for the lenders to approve the loan application even with a bad credit score.
The Bottom Line
Suppose an individual is not getting a loan from a bank because of a bad credit score. Then, the individual can take it from loan aggregators. However, this move can be costly as loan aggregators charge very high interest. So, it simply means that a person with a low credit score has to pay more interest than a person with a good credit score. As such, the best option for every individual is to improve their credit score before applying for a loan.