Car is one possession that most of the people cannot get satisfied with the owned model or version. Better version with improved features, technological advancement and enhanced performance keeps people going back to the dealerships to buy new cars. And whether it is the first car or any other number after the first one, driving out the new car extends similar excitement.
One thing that people have realized today is that it is better to go in for a loan rather than buying it from own funds. Primarily on account of the fact, that the value of car drops drastically, as soon as it comes out of the dealership. And today the dealerships themselves provide with one stop solution including the loan facility from various banks. But will you be able to get that loan to get to drive your dream car? Or will your new auto loan application drop? Believe it or not, all this depends upon your CIBIL score.
The first and foremost thing to understand is that the score given by credit bureau is reflective of your ability to manage credit effectively. What does this mean? It means that based on the way an individual has performed on the trade lines in past the bureaus are able to predict the chances of one going delinquent in future. Lower the score, higher are the chances for one to default on loan.
One important thing to realize here is that the score is based on the past loans and other credit facilities. So the score can be low in two situations. If one has defaulted in past or in case one has not been exposed to credit in past. In case you fall within any of these segments, it may get difficult for you get that auto loan approved. Now while the first situation is comprehensible, why is it that the second situation where one has not taken credit in past should get declined? After all there has to be a starting point somewhere for all new to credit guys.
Fair point, but what needs to be fathomed is that a lender would not expose himself to a large amount in case of not being sure on how the person would perform on the loan. In this case there could be following scenarios for you on that lending request:
All three situations mentioned above are not completely satisfying.
On one hand while one faces the fear of rejection on account of low score on the other hand one may have to take a financial hit (by pitching in amount from savings or in form of higher rate of interest being charged) on account of a lower digit reflecting on the bureau report.
So what should one be doing?
In case there have been financial stresses in past that have led to non payment of the loans, you must correct it by paying them now. And in case the you have been averse to taking that loan or have just started your career and do have much exposure, start by taking smaller loans. A credit card or two would be a good way to kick start your credit life. Those gadgets that you wish to buy can also be purchased on EMIs.
One thing that you would need to ensure is that the repayment is happening without any default and delay and over a period you would have a good credit profile where the lending institutions would be chasing you and offering a better deal on that loan that you need to own your dream car.
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