Can I Get a Two Wheeler Loan With Low CIBIL Score?
Grabbing a loan is an excellent way to finance a bike purchase without using up savings. However, before a lender sanctions these loans, they check the applicant’s credit score to determine creditworthiness. They decide the loan amount and interest rates based on this critical 3-digit number.
A CIBIL score ranges from 300 to 900. Applicants with a high score qualify for a high loan amount at low-interest rates. Some lenders may also offer them zero down payment bike loans. However, the situation gets difficult for those with a low CIBIL score, though not impossible. Here, you will understand how to get a two-wheeler loan with a low CIBIL score.
There is no fixed score that assures loan availability. However, generally, most lenders ask for a minimum score of 700-750. The higher the score, the better are the chances of availing of a loan at a low two-wheeler loan interest rate. Different lenders have varying eligibility conditions and credit score requirements to disperse two-wheeler loans. Therefore, it would be helpful to maintain a good CIBIL score.
Getting a bike loan with a low CIBIL score is possible but challenging. The chances of loan rejection are higher. However, suppose the applicant can prove a stable source of income and job security with a reputed employer. In that case, the lender may consider approving the loan but at a higher interest rate.
If the applicant has already defaulted on loans or applied for a high loan amount, the lender perceives high risk and rejects the loan application. Therefore, applicants with a low credit score must first try to improve their scores. Here are a few tips that work:
- Check credit report to spot and correct any errors
- Stay consistent with existing loan EMI and bill payments
- Reduce debt-to-income ratio by paying off existing loans
- Use credit cards judiciously to maintain a low credit utilization ratio
- Diversify credit portfolio with different types of loans, cards, and lines of credit
- Maintain old account to lengthen credit history
- Avoid applying for multiple loans within a short period
Here are a few useful ways for those who require a two-wheeler loan with a low credit score:
- Save for a Bigger Down Payment: Lenders finance 70-80% of the bike’s price as a loan, and the borrower has to pay the remaining amount. This amount is termed as a down payment. Applicants with a high credit score may even qualify for a zero-down payment bike loan. However, applicants with a low credit score may improve their chances by saving for a bigger down payment. Besides that, making a bigger down payment reduces loan tenure, prevents loan burden, and saves on the interest outgo.
- Apply for a Small Loan Amount: The lender will reject an application that demands a high loan amount with a low CIBIL score. Such applicants have a higher chance of loan default, and the lenders would not want to put a high amount at risk. However, they may consider lending a small amount at a higher interest rate. Therefore, the trick of applying for a small loan amount works in favor of such applicants. Repayment of a smaller loan is also easier for the borrowers.
- Show Proof of Income Stability: Some applicants might have had a difficult time in the past, because of which they could not build their credit score. However, now they might have a stable job with a good salary, and they may afford EMIs conveniently. If such applicants show proof of a secure job with steady income flow, the lender may approve their loan but at a higher two-wheeler loan interest rate.
- Apply with a Guarantor or Co-Borrower: Those having a low credit score must consider co-applying for a two-wheeler loan with a guarantor or co-applicant. The higher rating of the guarantor or co-applicant may help get a loan faster and with better interest rates. However, there will be additional KYC formalities to be fulfilled while co-applying for a loan.
- Negotiate with the Lender: There might be several reasons an individual could not build a credit score in the past. For such applicants, it is advisable to negotiate with the lender, tell them genuine reasons, and convince them to approve a loan.
While most NBFCs consider CIBIL score a critical parameter, it is possible to apply for a two-wheeler loan with a low rating. A low credit score might result from bad financial conditions in the past. The situation might have improved now, and it might be possible to afford loan EMIs. However, don’t let your past haunt your present. Use the tips mentioned above to apply for a loan with a low CIBIL score. Regular EMI repayment may become an opportunity to improve credit scores over time and increase credibility.