How to Get a Car Loan for a Low CIBIL Score

Owning a car offers essential convenience for daily commutes and personal errands. The Indian market offers a wide range of vehicles, including SUVs, multi-utility vehicles, passenger cars, and commercial models. With easy financing from banks and Non-banking Financial Companies (NBFCs), buying one is now more convenient than ever.

But getting a car loan with a low CIBIL score can be difficult, the lender can reject your application. However, even with a lower credit score, you can still qualify if you follow the right steps and knowledge. 

• You can get a car loan with a low CIBIL score, but the terms can be hard to follow in the long term

• There are NBFCs who offer car loan loans even if you have a low credit score 

• Negotiate terms, apply for a smaller loan, or pay a higher down payment to improve your credibility

• Add a co-signer or offer collateral to boost approval chances

• A score of 700+ is ideal, but lower scores may still qualify

• Keep documents ready and show income stability

• Improve your financial profile to avoid multiple rejections

Lenders generally view a credit score of 700 or above as ideal when applying for a loan. However, they assess more than just the number. They also review the following factors:

• Payment history

• Income stability

• Employment duration

• Existing debts

Even with a low credit score, you may still qualify for a car loan if you demonstrate strong financial stability in other areas, such as steady income, low existing debt, or a good repayment history. 

However, since your CIBIL score is one of the key factors lenders assess, a low score can lead to rejections from many providers. That said, there are steps you can take to improve your chances of approval.

Banks typically require a minimum CIBIL score of 700 for a car loan, though a score of 750 or higher is preferred to access the best terms and interest rates. A higher score will increase your chances of approval with better terms, such as lower interest rates and higher loan amounts.

If your score is below 700, you may still get a car loan. In that case you may need to accept higher interest rates and the terms can be tough to follow for a long time.

With a bad credit score, you must explore all available car financing options and prove yourself as a responsible borrower. Different lenders follow varying criteria and offer specialised solutions. Expanding your options will increase your chances of finding the most suitable deal.

• Choose the Right Lender

You can secure a car loan with a low CIBIL score by choosing the right lender. While major banks may follow strict approval criteria, many NBFCs take a more flexible approach. Some even support:

• First-time borrowers

• Small business owners

• Individuals with a limited credit history
  

• Negotiate with the Bank

If you have a low CIBIL score, do not hesitate to negotiate with the lender. While lenders typically rely on credit scores, you can strengthen your case by demonstrating financial reliability.

Consider these steps to improve your chances:

• Show proof of stable income: Present documents that confirm steady earnings

• Explain your repayment plan: Highlight how you intend to repay the loan on time

• Request better terms: Ask for a lower interest rate or negotiate for a longer tenure to reduce monthly EMIs
  

• Choose a Lesser Amount of Loan

Applying for a smaller loan can improve your chances of approval. Lenders view lower amounts as less risky and are more likely to approve them.

You can get other benefits of choosing a smaller loan, such as:

• Better terms: You may get lower interest rates and longer repayment options

• Practical strategy: Ideal if you don’t require a high loan amount

• Increase the Down Payment

Making a higher down payment is another way to strengthen your credibility with the lender. For example, if the cost of the car is ₹10 Lakhs and you contribute ₹6 Lakhs, you only need financing for ₹4 Lakhs. This will demonstrate your commitment and reduce the lender’s risk. Also, 

• As you are borrowing less, it will lead to lower EMIs

• A strong upfront payment reflects responsible planning and indicates that you are serious about the loan

• Find a Co-signer or Guarantor

Adding a co-signer to share your car loan can improve your chances of approval. A co-signer will share the financial responsibility and will agree to repay on behalf of you in case you default. 

This could be a parent, sibling, or a trusted friend with a good credit score. Any missed payments will affect your co-signer’s credit score. 

• Improve Other Eligibility Factors

If your CIBIL score is low, strengthening other eligibility criteria can improve your chances of loan approval. 

Lenders assess multiple factors alongside your credit history, including income, employment, and stability. Meeting or exceeding the basic requirements can help offset a weak credit score.

• Secured Car Loan Application

If you have a low CIBIL score, opting for a secured loan can improve your chances of approval. In a secured loan, you need to provide collateral, such as a fixed deposit (FD) or another vehicle, to back the loan amount. 

The chances of getting approval are much higher because if you default, the lender has the right to claim the collateral. 

• Special Loan Offers

Several banks and financial institutions offer specialised loan schemes for individuals with low CIBIL scores. These loans often come with higher interest rates, but can be your go-to solution when you do not have many options. 

• Apply for a Pre-approved Car Loan

If you have an established relationship with your bank, you can request a pre-approved car loan. Banks are more likely to extend such offers if you have a good account history and a track record of timely payments.

A low credit score can affect your eligibility and the terms offered on a car loan. Here are some common impacts:

• Loan Rejection

One of the most common reasons for car loan rejection is a low CIBIL score. Lenders view lower scores as a sign of higher default risk, which may lead them to reject the application.

• Higher Interest Rates

Applicants with low credit scores are at high risk for lenders. To compensate for this risk, they charge a higher interest rate. As a consequence, it will:

• Increases the overall cost of the loan

• Leads to higher EMIs

• Reduces affordability over the long term

• Lower Loan Amounts

Lenders often approve lower loan amounts for applicants with poor credit to minimise their risk, which can restrict your choice of vehicle.

• Requirement of Co-applicant or Guarantor

A co-applicant or guarantor will strengthen your application. But if you miss payments, the lender holds them equally responsible.

• Stricter Documentation and Verification

Lenders conduct more detailed checks when you apply with a low credit score. They will check your income and residential stability, along with your employment history. This may lengthen the approval timeline.

• Shorter Loan Tenure

As lenders view you as a risky borrower, they might offer you a short repayment tenure to get their money as soon as possible. As a consequence, you have to pay a high amount of EMIs. 

• Higher Processing Fees and Charges

Lenders often apply higher additional fees when they process car loans for low-score applicants.

• Limited Choice of Lenders

Few lenders offer loans to individuals with low credit scores, and you may have to agree to unfavourable terms. 

• Difficulty in Negotiating Terms

With a low credit score, your ability to negotiate better terms significantly decreases.

With the right strategy and practice, you can easily get the loan. The following are the tips that can increase your chances of approval:

• Check Your Credit Score: Review your credit report for any errors cause sometimes mistakes on your credit profile can lower your credit score without your knowledge

• Maintain Stable Income: A consistent income proof will reassure lenders about your repayment ability

• Compare Lenders: Explore different offers from several banks and NBFCs to find one that will fit right with your budget

• Keep Documents Ready: Make sure all the documents, such as income proof, ID, and address, are accurate and up to date

• Show Job Stability: A long-term employment record builds lender confidence and supports your application