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Certain Conditions to Avail a Car Loan with Bad Credit History

Many of us sometimes face the wrath of intense financial crisis. Generally such personal economic recessions badly affect loan repayment schedules, resulting in defaults. Bad credit history haunts the defaulter even when his/her economic condition returns back to normalcy again. He/she faces troubles in availing new car loan from the banks and financial institutions. However, there are certain considerations that make the ‘defaulter’ loan applicant eligible to get new car loan.


The Credit Information Bureau of India (CIBIL), in association with Dun & Bradstreet and TransUnion, has conceptualized a credit scoring system. It intends at taking various aspects of the intended borrower’s past credit history and rates him/her as a risky or a reliable borrower on a scale of 300 to 900. ‘300’ denotes the risk factor while ‘900’ is associated with the safe aspect.


Even a single default may land the borrower into trouble, jeopardising his/her future car finance dreams. There are certain parameters that can save you even if you carry ‘bad credit history’ status. ‘


1. Credit Record: Interest rate is inversely proportional with the credit scoring. In case it falls below a certain ‘mark’ then you need to get ready for coughing up higher car loan interest rate.


2. Employment History: Banks and other financial institutions will definitely consider your employment history to check your income stability while taking your car loan application into account.


3. Handsome Annual Income: If your annual income touches a satisfactory level, say for example Rs.2, 50,000 then it will prove to be a catalyst factor to hasten your car finance application processing phase.


4. Debt-to-Income Proportion: Your debt-to-income ration should not be on the negative side to spoil your chance as a suitable borrower. Reducing overall debt by at least 50% is the minimum requirement to apply for car finance policy.


5. Down Payment: If you are able to make a down payment of at least 20% of the actual car price then it will send a positive and definite message to the bank/financial institution that you are serious about buying the car and your ‘financial blues’ are over. Naturally, the financial firm will seriously consider your application.


6. Distinguished Service History: Loan applicants with strong career profile of serving in the military or other valuable service areas of national interest automatically earn positive response from financial institutions.


7. Excellent Educational Track Record: If you have maintained strong educational track throughout your higher studies then it will strengthen your application for a car loan.


8. References: If you can manage to rope in at least 5-6 well-established and renowned referrers, well-established especially in the business world then it will forward you case on fast track. It will make you a trustworthy borrower in the eye of the bank.


In the competitive financial and business scenario both PSU and Private sector banks vie with each other to attract and retain more customers. So they come out with attractive ‘loan’ policies from time to time while fulfilling the guidelines of RBI. Though you can not expect to get ‘competitive’ interest rate with ‘bad credit history’ on the new loans, at least you can expect to fulfill the desire to own your ‘dream car’. You need to make thorough research regarding individual car finance policies of different financial institutions. However, they will first make sure that you have no problem in paying regular EMI for car loan before approving your application.

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