used car loan

While getting a second-hand car can solve your travelling worries, getting a loan for the same can be something to worry about. While used car loans are quite common in India, having a low credit score can still hinder your chances of getting a loan. A credit score is necessary even if you get a used car loan instead of a regular one. However, do you know second-hand car finance is still possible without a good credit score?

To get a used car loan, you can easily visit the website of your preferred bank or NBFC and check your used car loan eligibility.

Here are some ways you can get a used car loan even without a proper credit or CIBIL score:

Meet other criteria

Apart from the credit score, there are other criteria to be qualified for a used car loan. These criteria include documentation like age proof, identity proof, address proof, income proof, and so on.

Income proof is a vital part of your loan approval process. Since a negative credit score suggests lousy credit behaviour, it hampers your reputation as a customer. The lenders will seek security since they trust you to repay the loan. They need to have full faith in the borrower regarding loan repayment. However, when the lender is convinced that you can pay off the loan, they will certainly not hesitate to give you their money.

Seek for Support

Second-hand car finance is possible with a loan if there is a guarantor. A guarantor is a person who is liable to take accountability for the borrowed amount if you cannot repay it. Generally, a person with a stable and secured monthly income can sign as a guarantor. Until you are paying off the instalments timely, this said guarantor has no role. However, the lender will contact him if there are missing payments or other discrepancies. You can get a used car loan without a credit score with a guarantor.

Collateral to the rescue

Collateral is needed when the loan is secured. This sort of loan is approved against a deposit. Any existing asset can be used as collateral. You can apply for a secured loan supported by collateral, and the lender generally ignores the credit score.

Collateral ensures that the borrower will repay the loan on time; if not, the lender will legally take full possession of the collateral. It makes the lender the legal holder of the collateral. Because there is less risk with collateral, even if your credit score reflects bad credit behaviour, the lender will not dither.

Choose Your Lender Sensibly

Although banks provide used car loans, their documentation and verification process is more tedious than the NBFCs. On the other hand, NBFCs offer borrowers a more fluid and flexible documentation process. Instead of a bank, you can go for an NBFC to get your used car loan.

NBFCs tend to offer loans with low credit scores if you provide proof of stable and secured income and proper identity, age, and address. They might conduct verification minutely to ensure no discrepancy, but their processes are more lenient than banks.

Take What You Need

Outline your budget and take the exact amount you need. With a low credit score, applying for a high-value loan might not be the best idea. High-value loans are approved by seeing the past credit behaviours of the customers, and when your credit score is not supportive, you should make your budget responsibly. Apart from that, the interest rate on used car loans is higher than normal. However, you can get a loan even at as low as an 8.5% interest rate.

Try to Improve

You can easily change your credit behaviour and improve your score in several ways. Many techniques include timely paying instalments, not missing credit card bills, etc. You can follow them so that you can have a healthy credit score.

A used car loan can fulfil your dream of owning a car, and now you can get it even with a low credit score. Remember that a healthy credit score is significant, so keep working to improve it!

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