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Who wouldn’t want to drive around in a big fancy car of their dreams? But not everyone can afford it. Some of us may be trapped in a financial crisis which affect loan repayment schedules. This may in turn result in defaults, thus creating a bad credit history.
The Credit Information Bureau (India) Limited (CIBIL) assigns a credit score, based on an individual’s borrowing and payments towards loans and credit cards. Most Indian banks accept 750 as the minimum CIBIL score for individuals seeking a car loan. If you have a bad credit score, fret not. It doesn’t mean you can’t purchase your dream car. Though you may not have it easy like other car loan seekers, you can still get a loan.
The following tips will help you get an auto loan when the bank is frowning at your CIBIL score.
Buy a new vehicle instead of a used one
Usually, loans for used cars are more expensive than that of a new one. Hence, it is advisable to buy a new car if you do not wish to shell out extra money on loan interests. However, if you find a good deal on a used car, go ahead.
Know what’s on your report
Checking your credit report is critical as many auto loan seekers assume that their credit score is low and thus end up paying more. If you find any errors on your report like charge-offs or late payment charges, fix it immediately.
The next logical step is research. Conduct your research about loan lenders, car loan interest rates, etc. Approach selected lenders which have a greater chance of lending the loan. Each time an auto loan lender pulls out a CIBIL report, it creates a tag. Too many inquiries on the report may adversely affect the lenders decision.
Don’t go above your price limit
Setting a budget should be at the forefront while planning to purchase a car. The price you end up paying may increase due to interest payments, mainly due to higher rates of a bad credit loan. Hence, prepare a budget and stick to it. Auto magazines, car loan calculator, dealer’s websites and other resources could provide a true cost of the desired vehicle.
Though you may not be in a position to negotiate the terms of the loan, you can try to settle for the best possible price. Don’t pay more than your budget. Instead, try to lower the price if possible.
Look out for add-ons
Car buyers end up signing contracts which have many unessential add-ons like extended warranty, after-sales service, insurance, etc. These add-ons add up to the cost, thus raising the amount of the loan required.
Make regular payments
Once the loan is approved and you’ve purchased the car, make regular payments. Set up automatic payment options to help you pay the loan on time. Chances are the lender may repossess your vehicle should you miss a single payment.
Don’t let bad credit come in the way of buying your dream car. Plan well and research well before approaching lenders. Once you have shopped within your price range and made regular payments, you know you’ve made financially right decisions.
Know more about car loans and their interest rates at Mahindra Finance.
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