Due to the rising costs of brand new vehicles, used cars are now becoming a popular option for the masses. Second-hand cars are not only affordable but also provide an array of benefits like low registration cost,low depreciation rate, value for money, besides others.
Given the numerous benefits pre-owned cars have to offer, many individuals are now opting for such cars. The ratio of new cars to used cars is 1:2.2, according to Credit Rating Information Services of India Limited (CRISIL). The finance industry responded to this boom in the used car market by offering loans. Borrowers seeking loans repay through Equated Monthly Installments (EMIs) over a period of time along with interest.
Loan eligibility
Lenders take many factors into consideration while providing loans to applicants, namely income, repayment ability, financial status, besides others. Another aspect for loan eligibility is the credit score of the loan seeker. A credit score is a numeric summary given by Credit Information Bureau (India) Limited (CIBIL).CIBIL maintains a record of an individual’s loan and credit card payment. Based on timely repayments, CIBIL then provides a score ranging from 300 to 900. The higher the score, higher are the chances of getting a loan approval. This is because lenders perceive applicants with high scores to be less risky. Such individuals have a good repayment history and have very fewer chances of defaulting on their loan payments.
CIBIL score range
If your credit score is above 750, you may obtain a loan rather easily. However, this does not mean that it is impossible to avail of a loan with a lower score. There are many banks and lending institutions in the market that provide used car loans to individuals with bad credit. It is, however, necessary to understand that the interest rates will be higher in such cases. Lenders charge a high rate to offset the risk associated with default on payments.
To avoid high rates of interest, it is advisable to fix your credit score before applying for a loan. You may enhance your score by making timely repayments on your loan and credit card bills. Also,check for any errors on your credit card report and correct them accordingly. These steps go a long way in building your credit and improving your score.
You may avail of a used car loan on EMI if financial constraints are holding you back from making your car purchase. Nowadays lenders offer flexible repayment schemes wherein you may repay according to your cash inflow. Furthermore, most lenders also have an online presence, which makes loan application process convenient. You may also use a used car loan EMI calculator to calculate the regular EMI amounts and manage your finances accordingly. Go ahead, make the purchase, and drive home the car of your dreams.
