If you are looking to buy a pre-owned car, there are high chances that you might need a used car loan. In some cases, you get a loan up to 95 per cent of the car’s value. You can repay the loan taken in easy EMI instalments. However, getting a loan approved for a used car is not easy. The primary factor in getting used car loan eligibility is a good credit score.
Banks and other financial organisations check your creditworthiness and credit history. They check your CIBIL or credit score and then approve the loan. Therefore, having a good credit score is very important to get a used car loan. A good credit score has a powerful impact on the used car loan approval process as you get low-interest rates, better loan terms, better loan amounts, etc.
Here are some of the benefits that you can avail yourself on a used car loan if you have a good credit score:
1. Less paperwork and documentation
If you have a good credit score, you have credibility. Thus, when applying for a used car loan, the bank will not ask you to submit many documents. You would also not be required to go through detailed enquiries. Moreover, with a good credit score, the loan approval process will be smooth and swift. You would not be required to submit supplementary income proof documents as your CIBIL or credit score is good enough.
2. Lower interest rates
Another perk of having a good credit score is that the used car loan interest rates will be attractive. The interest rates tend to be lower than those who do not have a good credit score. With a good credit score, you have the strong bargaining power to get the best possible interest rates on your used car loan. You can also negotiate the flexible EMI structure on your loan, extended loan tenure, etc.
3. Enhanced loan amount
Banks and other financial institutions want to take the minimum risk while disbursing the loan. They prefer candidates with good credit history. Therefore, lenders are willing to give big loan amounts to people with superb credit scores, which lowers the lenders’ overall risks. As a consumer with a good credit score, this means that you can avail of an enhanced loan. This, in turn, means you can go for premium or luxury cars.
4. Speedy loan processing
The used car loan approval process takes time for those who do not have a good credit score. The lenders ask to submit numerous documents related to income and creditworthiness. They also conduct a lot of enquiries and screening before finalising on loan. However, if you belong to a category of people whose credit score is north of 750, you need not go through all of that. The used car loan approval is speedy, hassle-free and hardly takes any time.
5. Favourable terms and conditions
As discussed earlier, if you have an excellent credit score, you are eligible for lesser used car loan interest rates. Besides lower interest rates, you are also entitled to some other benefits:
- The terms and conditions become flexible and are relaxed in your case.
- The EMI structure becomes flexible (you can calculate your EMI with a used car loan EMI calculator).
- The processing fees is reduced or waved off completely.
- You get an option to foreclose the loan without incurring any charges, etc.
Keeping your credit score in check is a good practice as this can significantly impact your used car loan approval process. Also, if you have a good credit score, do not miss to avail of the benefits mentioned above.