How Good Credit Score Can Be Helpful in Buying a Car
there is no accepted industry-wise benchmark fixed for a good credit score for a car loan. lenders may have different parameters for what they require as a minimum score for car loan approval. generally, a score of 750 and above is accepted as a good score, while a score lower than 600 could reduce the chances of getting a loan sanctioned.
apart from that, what role does your credit rating play in getting approval for a car loan? read on to understand the importance of being credit healthy?
a good credit rating can help you in buying a car in the following ways:
the credit score is not the only factor when it comes to loan approval. many aspects impact your loan eligibility and approval. use a car loan eligibility calculator to find out if you fulfill the eligibility criteria laid down by the lender for getting a car loan. a credit score is an indicator of your creditworthiness; a good rating will help hassle-free and quick loan approval. those between 600 and 750 might face some challenges in loan approval, depending on a host of other factors.
credit rating also impacts the car loan interest rate. a high rating indicates that you are creditworthy and pose a lower risk of default for the lender. lenders charge interest for the risk they undertake when extending a loan and for the opportunity cost of using the funds. a good rating means lesser risk, which means you can avail of a loan at a lower interest rate than someone with a lower rating.
when you buy a car, you need to make a down payment; the remaining amount can be availed as a loan. a low rating will reduce the amount of loan you can get, and as a result, you will have to shell out more from your pocket. if you have to pay more as a down payment, then either you will have to dip into your savings or postpone your plans of buying a car till you can save enough for the down payment. applicants with a healthy score are preferred over those with lower scores; banks or nbfcs are likely to offer them bigger loans. a car loan calculator can help you calculate the loan amount for which you are eligible.
a low credit score limits your options when it comes to lenders. few banks are willing to extend a loan to those with low credit ratings. a good score ensures that you have more choice and can approach a lender who offers you the most favourable terms like low processing fees, longer tenures, higher ltv ratio and competitive interest rates.
when you do your homework before taking a loan, remember to focus on the fine print, your requirements and your repayment capacity. compare products offered by lenders on various parameters and use a car loan emi calculator to calculate your monthly outflow. being sure of your emis helps you in better financial planning and staying in good credit health.