Credit scores prove to be an essential factor while you consider buying a car. The credit score for a car loan is usually determined within the range of 300 being the lowest and 900 being the highest. Having a low credit score can affect your chances of car loan approval as the lenders tend to evaluate your credibility based on the scores. Credit scores as low as 520 can significantly lower the possibilities. Nevertheless, there are numerous ways in which you can buy a car with low credit scores. So, before you apply for a loan, have a credit score check done online to know your credit score and evaluate your chances of getting the loan approved.
Can I Buy a Car with a 520 Credit Score?
The credit score for car loan requirements is usually considered to be higher than 750. But, people with credit scores of 520 can apply for a car loan and buy one. If they do not apply from a bank, they can at least apply for a loan aggregator. However, this can be costly because loan aggregators charge higher interest rates. Therefore, the logical choice is to increase your credit score before applying for a car loan. You can do that after you conduct a credit score check. If you have low scores, then try increasing it with smart efforts. Choose a car loan with a lower interest rate and take your dream car home.
What are the Ways that I Can Buy a Car With a Bad Credit Score?
Many Indians display a low credit score for car loan applications. However, with the advent of financial technology, lenders have introduced new methods to finance people to buy their dream car. But before that, always try to improve the credit score and the following methods or tips will help you buy a car according to your choice:
Performing a Credit Score Check Before Applying
Getting a car loan with a low or bad credit score is more expensive than getting a car loan with a good credit score. If your credit score is not good, try to improve your credit score before applying for a loan. Some ways to improve your credit score are paying off existing debts, outstanding debts and paying them on time. So have a proper credit score check done before applying for a car loan.
Don’t Apply for Multiple Loans in a Short Period of Time
Before you apply for a car loan, clean up your credit and don’t take on additional credit obligations. When processing your loan application, the bank will look for red flags, such as overdue payments, outstanding debts, tax liens, bankruptcy, etc.
View Current Car Loan Interest Rates
Compare various car loan quotations online and select low-interest car loans. The interest rate of the car loan determines the total cost of your loan and EMI payments.
Voluntarily Pay a Higher Down Payment
When you pay a large down payment for a car, the total cost of the car loan will go down. A higher down payment also means lower interest payments and handling fees. The processing fee for a car loan is a small part of the loan principal that the bank has to deal with. After receiving the loan, the borrower must repay the loan in advance.
Apply to Your Bank for Pre-Approved Loans
Some banks only provide pre-approved loans to existing customers based on their KYC documents. In this case, even if the credit rating is low, you have a better chance of getting a car loan from the bank. Talk to your bank account manager and negotiate the terms.
Choose a Model that Fits Your Budget
Applicants with low credit scores may not be able to get large auto loans. So, pick a model that doesn’t exceed your budget, and cancel out some fancy features, like advanced speaker systems or sunroofs, if necessary.
What are the Best Car Loans for a Bad Credit Score?
A good credit score for a car loan or any other loan is very important. Having a low credit score may affect your car loan application. But there are certainly different ways to apply for a car loan that prove to be beneficial.
Used Car Loans
Most banks offer used car loans to buy certified used cars. However, the interest rate on used car loans is higher than the interest rate on new car loans.
Auto Loans
FD loans and auto loans are other alternatives to new or used auto loans. Your existing FD or car can be used as collateral to obtain funds to purchase a new model.
Co-operative Banks
Several cooperative banks provide low-interest auto loans with limited credit checks on the borrower. Yet, it may have drawbacks such as high-interest rates and a low borrowing limit.’
Private Lenders
The private lenders offer secured automobile loans backed by the vehicle. Interest rates will be substantially higher than those offered by banks. Even if you have a bad credit score, you can get a loan.
In most circumstances, these types of loans are approved quickly. The value of the vehicle pledged against the loan protects the lender from defaults when it comes to automobile loans. As a result, no cosigners are required when applying for this loan.
Before you consider taking out this loan, ensure that the repayment terms and interest rates are suitable for you.
What is a Credit Score and Its Role in the Approval of Loans?
Credit scores are a three-digit number that portrays how credits such as personal loans, mortgages and credit cards have been administered in the past. The credit score shows the lender regardless of whether it is a trusted borrower. When requesting any credit card type, the lender or NBFC conducts a thorough credit score check and the credit history maintained in your credit report.
Your credit score is calculated from 300 to 900. The greater your credit score, the better, since it is more likely to approve it for new credits. The credit score is an important indicator used by lenders to assess the creditworthiness of potential borrowers. It shows your reliability or degree of risk as a borrower. Therefore, it directly affects your eligibility for a loan, the loan amount that the lender will provide you, and the interest rate you must pay. As a result, the lenders can judge the potential risks of lending you funds.
What Range is Considered to be a Bad Credit Score?
The credit score is a measure of your creditworthiness and is displayed in numeric format. It varies between 300-900, where 300 is the lowest and 900 is the highest. You should always strive to maintain a credit score close to 750-900. Most banks and NBFC believe that a credit score of 750 or higher is ideal. Let’s take a look at the different credit score ranges:
| Range of Credit Score750-900Range of Credit Score | Comment |
| 300-550 | Bad |
| 550-650 | Average |
| 650-750 | Good |
| 750-900 | Excellent |
What does a 520 Credit Score Mean?
A credit score of 520 comes within the range of 300-550 and is considered to be a bad credit score. If your credit score is within this range, you will need to take serious steps to improve it. A low credit score will not make you eligible for a loan or credit card. Any score of 750 or higher is considered ideal and eligible for various credit cards and loans. If your credit score is less than 750, it will be difficult for you to obtain loans from NBFC and banks. If the loan is approved, if the CIBIL score is less than 750, the interest rate will be high. If the credit score is low, the bank and NBFC will reject the application.
What is a Good Credit Score and Its Dependent Factors?
In India, a good credit score is 700 or higher. The higher the credit score, the more confidence the bank and NBFC will have in you in repaying the loan. The higher your credit score, the lower your down payment and interest rate. Credit scores ranging from 300 to 579, 580 to 669, 670 to 739, 740 to 799, and 800 to 850 are considered very bad, average, good, very good, and very good respectively.
Credit score depends on several factors: derogatory information, recent credit applications, credit history, length of credit history, credit utilization, and payment history. Paying all bills on time without multiple inquiries will ensure your credit score does not drop. Conduct your free credit score check through online services and know your score instantly.
What is the Need to Have a Good Credit Score?
So far, you came across the basic information about credit score and their range and what provision it holds as per the score range. Your credit score is crucial to your financial well-being. You prefer high credit scores because they can unlock a lot of savings and perks, such as access to the best loans and credit cards. So always perform a regular credit score check to avoid any irregularities in your report.
Here are some of the reasons to have a good credit score,
Low-Interest Rates
One of the advantages of having a good credit score is that banks may give you lower-interest loans and credit cards. Other advantages include a reduction in the processing charge and the possibility of obtaining a larger loan amount.
Experience the Best Rewards
You can also receive access to some of the most rewarding credit cards on the market if you have a high credit score, even those with the lowest rate of interest and the finest incentives, such as rewards points, vacation points, and other perks.
Quick Loan Approval
Borrowers with a good credit score are regarded as low-risk, which means their chances of getting loans and credit cards are better.
Access to Pre-Approved Loans
Pre-approved loan options are available to borrowers with good credit scores. Banks will make a pre-approved loan option to existing customers with a decent credit record in most cases.
FAQ
Is 520 out of 710 a good credit score?
The credit score between the range of 550 to 650 is considered an average score, while the range of 650 to 750 is considered good. Therefore, the credit score of 520 is referred to as an average score and not a good credit score.
What is the lowest credit score to buy a car?
If you’re concerned that your credit score will prevent you from purchasing a car, you’re underestimating how eager car dealerships are to sell you one. However, a higher credit score will almost surely result in a reduced loan interest rate. Although there is no common minimum credit score for a car loan, your credit scores can significantly impact your ability to acquire a loan.
What loan can I get with a 520 credit score?
Most banks and financial organizations prefer applicants for credit loans with a credit score of at least 750. So, with a score of 520, getting a loan would be challenging. However, you can always improve your score in numerous ways.
How can I check my credit score online?
In addition to the CIBIL website, you can also avail yourself of the credit score check option on the bank aggregator website. Check your credit score on the CIBIL website for free, or you can access it by choosing a subscription plan. After the free subscription, you can view the current CIBIL report once a year. CIBIL also has paid plans that provide access to various additional features based on the plan you choose.
