How Does Your Credit Score Impact Your Used Car Loan Approval

What is a used car loan?

Buying a used car is a smart choice today. With all the understanding and inspection of the car, it makes more sense to buy a pre-owned car over a new one.

Buying and owning a second-hand car has become more common these days with newer advancements in the making of a car, enabling it to run, look, drive, and last longer than it used to earlier. Pre-owned car loans are affordable in terms of finances and more car buyers are opting for used cars lately.

The benefits of loans usually depend on the lender like a bank or an NBFC. Car buyers can avail of loans approved for used cars with inexpensive interest rates and flexible loan tenures.

There are several factors you must keep in mind before planning to purchase a second-hand car. From knowing the vehicle well to learning if all documents presented are reliable, many steps must be considered before going for a second-hand car.

Loans on pre-owned cars are flexible and easy to avail. The interest rates are low and the rate of approval is high.

What is a pre-approved used car loan?

Pre-approved car loans are ones where a financier considers you eligible for a pre-owned car loan before you even apply for one. If you are found to fit into the bank’s eligibility criteria, they will sanction and disburse the loan amount for you to buy your preferred pre-owned car.

Benefits of Getting a Pre-approved Used Car Loan

• Instant fund disbursal
• Minimum or free of documentation
• Maximum funding from the bank
• Flexible repayment tenures

What is cibil score?

Cibil score or credit score is a crucial factor for loan approval in India. The credit score of a person expresses his creditworthiness in numeric value. The same is expressed in numbers between 300 and 900. The maximum score is 900 denoting the maximum creditworthiness. A good score shows the loan seeker’s ability to repay the amount. The higher the credit score, the better the chances of getting the loan approved.

• It is considered a poor credit score if it ranges between 300 and 599.
• It is considered a fair credit score if it ranges from 600 to 749.
• A good credit score ranges between 750 and 900.

Lenders try to understand how the borrower has paid back their past debts with the credit report. Lending organizations sanction a loan after examining the creditworthiness of the applicant.

Why is a credit score important in used car financing?

One of the primary factors for the development of the used car loan market is the availability of easy pre-owned car loans. Financiers usually accept a loan application from an individual with a higher credit score. Financiers and banks can easily accept a loan application with a higher credit score.

Usually, the minimum credit score for a used car loan is 750 points. If you can maintain a credit score above this range, a bank may allow negotiate for early loan terms, like an affordable interest rate and a higher amount. You can avail of used car loans with flexible loan tenure and easy EMI repayment options. Today, these loans are known for being quick on disbursements and require minimum documentation.

Wrapping Up

Here are a few factors you can keep in mind while availing of a used car loan along with maintaining a good credit or credit score. You can follow the same steps to constantly keep a good track record of your credit score as well.

• Must be an existing customer with the financier or bank
• Must repay all credit card bills on time
• Must maintain a good cibil score
• Must maintain adequate funds in the savings account
• Must refrain from using up the entire credit limit on your credit card
• Must have repaid all previous loan EMIs on time