Planning to buy a new car?
The first thing you need to check is your credit score. Before you select a car, plan your EMIs and prepare your budget you need to know if you’re going to get a loan or not.
The credit score is the single most essential factor banks consider when approving a loan. Especially car loans and credit card applications.
Depending on your credit score, your interest rate is defined as well. You can save a decent amount of money over a course of time with a high credit score.
The credit score ranges between 300-850. In case of applying for a car loan, the minimum credit score to get approval is 730. However, you might get a higher interest rate than usual.
If your score is 750 or above, chances are you will get instant approval on up to 90% of the ex-showroom price of the car you choose.
Preferably I would say you should have a credit score of 750 like most CAs and finance experts would.
But from my personal experience, I got a car loan with a credit score of 730.
A few months back purchased my first car – a Hyundai Venue SX. Being a teenager, I didn’t have a year-long credit history.
Instead, I had 7 months of credit card transaction history to support my loan application.
I made a few mistakes of not paying the credit card bill on time – I thought I had successfully set up the auto-debit feature and the bill would get paid without my involvement.
That wasn’t the case. I ended up missing 2 payments and my credit score went down to 730.
I still got my loan approved with ICICI bank.
What I learned in the process were three big lessons:
- Always aim for a credit score of 750 and above
- Always have updated income documents
- Don’t miss monthly payments on credit cards and loans
Although it is possible to get a car loan at 730 credit score, you should positively try to improve it and take it above 750. That’s the ideal score to become a decent finance consumer in the eyes of financial institutes.
Any score below 750 is considered moderately poor.
It directly means you have missed payments, you’ve been fined for the delayed bill payments or have defaults. All of which is a nightmare for you as banks notoriously dismiss any application with default or missed payments in their credit reports.
The best Indian banks to get a fast car loan approval with a minimum credit score of 730 are HDFC, ICICI and IndusInd banks.
I hope you got the answer to your question. The next step is to apply for a car loan with at least 20% of the downpayment in hand. If your credit score is above 750, you’ll get 90% of the ex-showroom cost of the car.
Make sure you save at least 20% of the car cost to cover insurance, tax and other unforeseen costs that may occur.
Any questions? Let me know by leaving a comment below.