Avail Car Loan with Considerations

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While qualifying for a car loan with a negative credit score (below 580) may appear challenging.  There are many lenders and car dealers who are more eager to work with low- and bad-credit score applicants.

Before availing of Canara Bank Car Loan, an individual must check his credit score, income, personal stability, down payment options, and ability to repay. These five things must be considered before applying for a car loan.

1. Credit score details

When you have a low credit score, the car lenders except on application will often charge a higher interest rate for having expensive loan conditions as they are mitigating the risk. A credit score summarises a personal credit history and creditworthiness that the lender used to evaluate to approve your loan application. CIBIL score usually checks a three-digit number ranging from 300 to 850, which can determine your worthiness for a loan. The CIBIL Score ranging from 800 to 850 is termed extraordinary while ranging from 740- 799 is considered excellent and usually is considered for loan approval. 670-739 is deemed ideal, whereas 580-669 indicates a low CIBIL score and below 580 indicates poor credit history. 

If you have a fair or extremely bad credit score, you should improve by correcting inaccuracies and paying all your dues on time. Payment history accounts for 35% of one's credit score and is termed as an important factor. The other factors contributing to your credit score(10%) are credit usage -30%, credit history-15%, new credit-10% and credit mix-10%.

2. Personal stability

Lenders consider the applicant employability and how long they are working under the same employer at the present location. In addition to one’s income and information, they also see the repayment capability in the long term. Lenders utilise employment and residence to assess the risk you carry as a borrower. Proof of address and employment has to be submitted to the lender for verification purposes.

3. Down payment options

The importance of a down payment cannot be overstated or emphasised. It might be difficult to have extra cash in hand when intending to pay bills in order to improve your credit. Making an advanced partial payment can improve your chances of loan approval. It can indicate to the dealer or seller that you are serious about purchasing a car and have the capacity to make the down payments. Depending on the advance prepayment amount, additional charges such as interest, tenure, repayment can be levied. 

4. Income source

Even if you have a poor credit score, lenders will consider your monthly income in contrast to your expenses when determining your capacity to repay a loan. They want to ensure that you can afford the new monthly car payments on top of your existing debts. On this basis, a loan amount will be approved to an individual by lenders. This will assist the lender in determining whether or not to offer the loan, and interest rates, additional fees, or down payment may be necessary to secure the loan. The more significant the risk, the greater the borrowing fees.

5. Ability to repay 

Before making a purchase, one should do adequate research on a car and its price and estimate the amount which an individual can afford. You should know better than anybody how much debt you can afford on a monthly basis based on how much you spend every month against your income. The estimated cost of Car insurance, registration fees, and other expenses tied to a car purchase should be calculated. Purchasing a car is an exciting thing, but don’t get carried away and stick to your financial ability. Buying a car that you won’t be able to afford can negatively impact your credit score. A Car Loan EMI Calculator can be used for estimating the amount of EMIs to be paid overtime and help in financing your debt. 

Thus one should be very careful while financing a loan as it is risky as well as impacting your credit score, which will be valid for the next ten years. 

 

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