Individuals borrow from banks and Non-Banking Financial Companies (NBFCs) to finance their dream car. Obtaining a loan has become a popular finance option due to the numerous benefits it has to offer.
The primary goal of a lender is to get back the amount lent to the borrower along with a certain profit margin. For this purpose, lenders carry out a thorough check before approving a loan application. Lenders may reject the application if the borrower fails to display his ability to repay. It is, therefore, important to be well-prepared and take the necessary steps to increase your odds of gaining loan approval.
Following are six tips to improve your chances of getting a used car loan approved:
1. Review your credit score
The Credit Information Bureau India Limited (CIBIL) provides a rating, known as CIBIL score, to an individual based on numerous factors such as loans, credit cards, and other financial holdings. This number, ranging between 300 and 900, is a reflection of the repayment ability of the individual.
Banks and NBFCs check the CIBIL score before approving a car loan application. Higher the score, greater is the chance of gaining loan approval. It is, therefore, necessary to check your used car loan eligibility and ensure that you have a good credit score before submitting your loan application.
2. Have a stable source of income
Besides credit score, lenders also conduct a check on your sources of income. A higher income and stability in your career indicates that you are financially stable. This means that you will be able to repay your Equated Monthly Installments (EMIs) on time. Once the lender is convinced of your ability to repay the loan, the chances of approval increase to a great extent.
3. Borrow how much you can afford
Borrowing more than you can afford will reduce the odds of obtaining a loan approval. Identify the EMI amount by using a car loan EMI calculator. An EMI calculator is a digitized tool present on most lenders’ websites. All you have to do is enter loan-related details such as the principal amount, loan tenure, and interest rate to identify the EMI amount.
4. Maintain good relations with your lender
Keeping good relations with your lender is a win-win situation for both parties. Your lender benefits from a loyal customer, while you may enjoy quick approval and competitive interest rates. Additionally, your lender may also provide other attractive terms of the deal such as high borrowing amount, extended loan tenure, flexible repayment options, minimal documentation, and lenient eligibility criteria, besides others.
5. Apply for the loan with a co-applicant
You are most likely to meet the approval standards if you apply for a loan with a co-applicant. Adding a co-applicant indicates that the person’s income is added to yours. This improves your creditworthiness and also helps you get a better interest rate. You may, therefore, ask your partner, parents or other family members to co-sign the loan with you.
6. Make repayments on time
While approving a loan application, lenders check if you have any existing debt. They identify whether you are making timely payments towards your existing loan as well as your credit card bills. A good repayment history improves your chances of gaining a loan approval; and hence, make sure to complete your repayments on time.
Follow these tips to improve your chances of getting a new or used car loan. Once the loan has been approved, use the disbursed amount to purchase a car and drive home the vehicle of your dreams without any financial constraints.