A good CIBIL Score for a Car Loan in India is 700 and above. Car Loan is the most common and widely availed loan in India. A vehicle loan is processed based on the repayment capacity and previous track record in the debt repayment of the applicant. While repayment capacity is analyzed through ITRs (Income Tax Returns) or salary slips, previous track record in debt repayment is analyzed through CIBIL Score/ CIBIL Report.
A higher credit score allows the bank to finance easily because an applicant with a satisfactory score is less likely to make a default in the future. Hence, having a good CIBIL Score is important if you are thinking of buying a car. In this post, we will discuss a good CIBIL score for a car loan in India, steps to improve car loan CIBIL score, and frequently asked questions.
A good CIBIL score for a car loan in India means the score acceptable by the banks to sanction a car loan proposal. An applicant with a low (unacceptable) CIBIL Score is less likely to be approved for a loan by the banks as the risk of default in such loans is higher as compared to applications with a higher (acceptable) CIBIL Score. While CIBIL Score ranges from 300 to 900, a score above 750 is considered best and the banks finance such individuals very easily. Following are the 4 types of CIBIL Score:
Here are FAQs:
The credit bureau (CIBIL) keeps a track record of every borrower in India, analyzes the repayment of loans through the data shared by the banks on monthly basis, and further reflects the track record of the borrower through CIR (Credit Information Report) which is extracted by the banks before consideration of any loan in India. CIBIL Score plays an important role in the decision of car loans in India.
As a car loan is a secured loan with the vehicle hypothecation active, the CIBIL score required is at least 700. The higher the score, the better are your chances of availing of the loan. Some financial institutions may even offer credit on a score over 650.
The banks get to know about the record in debt repayment of the applicant which enables them to decide whether the loan is to be sanctioned or not. Applicants with higher CIBIL Scores are more likely to be financed by the banks. The bank can reject any loan proposal if they are not convinced with the previous repayment history of the applicant.
Interest Rate in the majority of car loan products available in the market is linked with the CIBIL Score of the applicant. The lenders offer the interest rate on a differential basis. An applicant with a higher CIBIL Score is offered a lower rate of interest because the chances of default in such a case are low. On the other hand, a higher rate of interest is offered to the applicants with a lower CIBIL Score.
Since the loan applications with higher CIBIL scores are considered to be less risky, banks can finance up to 100% of the ex-showroom price of the vehicle in such cases. On the contrary, if the CIBIL Score of the applicant is low, the bank may ask the applicant for a higher margin. In many cases, the banks have tie-up arrangements with famous car brands in India and can advance up to 100% of the on-road price of the vehicle in tie-up arrangements.