Everyone is fascinated by stylish cars and wants to own once in their lifetime. Banks are always looking for such interested buyers and offer them car loan. However before any type of loan (car, personal, home etc.) or credit card approval by financial institution, a thorough history of the applicant is done. And based on following most important factors, loan application is either rejected or approved.

• Annual Income: This is checked to check the repayment capacity of the individual. A low income person has higher chance of getting the loan rejected.
• CIBIL Score: Your past repayment history of credit card or any type of loan is the single most decisive factor. Even if you meet all the eligibility criteria, as poor CIBIL score can result in loan denial. This score is calculated out of 900 and higher your score, higher are the chances of loan approval. Ideally score below 700 is considered to be very poor.

Reasons for poor CIBIL score are:

• Payment default: A history of frequent payment default irks financial institution. You can co-relate this with real life. Imagine one of your friend has borrowed money from you many times by promising paying the same without any delay. However, your friend often delayed paying the money and that too in installments and some times did not even pay the full money. Now if the same friend demands more money, will you borrow him? Ofcourse not and obvious reason is the late payment history and you don’t feel him to be credit worthy as he had delayed the payment previously. Same logic is used by banks, they verify your repayment history by CIBIL.

Other reasons for car loan rejection are:

• Credit limit overutilized: This according to the loan issuer is a sign of too much reliance on credit and over spending the same. So in the past, if you have crossed the credit limit many a times then chances of getting a car loan increases.
• Number of credit applications made: If you have history of applying for credit many times in the past then it creates suspicion that you are relying only on borrowed money.
• Multiple loan or credit cards already taken: If you already hold other loans and make use of multiple credit cards then banks will re-think multiple times before granting any credit. Because such individual’s for a bank are considered to be risky because chances of defaulting the payment is high since you already trapped in other credits.
• Employment Type: If you are a service person then the company you work for and how frequently you change the job is also taken into consideration by the bank.

When it comes to car loan apart from the above listed factors following details are also taken into consideration:

• Price of Car
• Car Segment
• Type of car – Used or New

How can CIBIL defaulters get car loan?

Make full payment and provide reason for the payment default to the credit institution. Based on the clarifications provided by the applicant, banks will decide on whether to approve or reject the application. There could be many reasons why an applicant might fall into the category of a defaulter such as job loss, emergency money need, etc. If you could explain this to the bank honestly then they may consider your application positively. This will help applicants with good repayment history and recently defaulted on the payment due to the mentioned reasons.

• Loan against fixed deposit: One of the best recommended solution for cibil defaulters seeking car loan is utilizing fixed deposit. This has many benefits such as less paperwork involved and interest rate is low. Loan amount depends on the tenure and loan amount.
• Private Financing: If car loan of a CIBIL defaulter is rejected then take help of private financers. However one of the biggest drawback is that these financers charge higher interest compared to banks. Few of the private financers are Magma Fincorp, Mahindra Finance, Sundaram Finance and more on.
• Co-operative banks: This option is also recommended as salary required is small compared to big financial institutions.

Due to the growing economy owning a car has become more of a comfort thing compared to the past, wherein people used to buy car for prestige and living standard.