The impact of CIBIL score on two-wheeler loan approval

Your CIBIL score determines your creditworthiness, something that banks and NBFCs consider while sanctioning two-wheeler loans. Check out the credit score impact on loan and how you can still get a loan approval with a low CIBIL score.

Bracing up to finance your new motorcycle through a two-wheeler loan? It’s imperative to maintain a decent CIBIL score to qualify for these financial privileges. Leading banks and NBFCs prefer lending to financially stable borrowers. Your CIBIL score speaks tons about your financial stature and creditworthiness. Naturally, individuals with a high credit score are likely to qualify for two-wheeler loans faster. 

In this article, you will get to know the credit score impact on loan approval process.

What is a CIBIL score?

CIBIL (Credit Information Bureau India Limited) is credit bureau that evaluates your money-handling habits. Therefore, your CIBIL score is basically your credit score from the specific bureau. Your credit report goes a long way in determining your loan eligibility. This financial report helps banks and NBFCs evaluate your creditworthiness based on the recorded money-handling habits.

The credit bureau collects your financial data from banks, NBFCs, credit unions, and other financial organizations every month. Based on these inputs, they prepare your credit report. This includes information on the following aspects:

• Your ongoing liabilities
• Different types of loans you have taken
• Debt-to-income ratio
• Records of missed or delayed payments
• Age of loan accounts

On evaluating all these financial parameters, the credit bureau publishes your report and attributes a credit score. A CIBIL score above 720 is considered to be respectable, while one above 750 is considered good.

What is the ideal CIBIL score to get a two-wheeler loan approval?

Since a motorcycle loan is unsecured, it’s easy to obtain one even if your credit score is moderate. So, try to maintain a CIBIL score of at least 700 to qualify for a two-wheeler loan.

Have a look at the credit score impact on loan below.

• Credit score below 650: Very difficult to obtain a two-wheeler loan.
• Credit score between 650 and 700: Interest rate may be high on approval
• Credit score between 700 and 750: Loan likely to be approved at moderate interest rate
• Credit score above 750: Loan highly likely to be approved at a low interest rate

What do lenders check in your CIBIL report?

Your CIBIL score matters when banks or NBFCs weigh your creditworthiness for loan approval. Here’s what they look out for in the credit report.

• If you have any report of a written-off case, it would be visible in the Account Status section.
• Your CIBIL report reveals your payment history and money-handling trends. Lenders would check whether you paid off your previous loans on time.
• In case there’s any overdue amount or defaults, your credit report would reflect it. 
• Banks check the debt-to-income ratio in your CIBIL report. In case your ongoing liabilities exceed 50% of your monthly income, the lender might reject your loan application.
• Banks also check your credit mix, which includes loans from credit cards, personal loans, home loans, education loans, automobile loans, and other credit facilities you have taken.

What is the loan approval process for a two-wheeler loan?

Once you apply for a two-wheeler loan, the bank or NBFC would evaluate the following aspects:

• Your monthly income
• Employment or business income proof
• Your CIBIL score
• Current loan repayments
• Your credit record 

With a healthy CIBIL score, you can qualify for up to 90% of the value of your new motorcycle. Besides, having a respectable credit report helps in qualifying for low interest rates. Once the lender scrutinizes your documents, they would approve the loan and disburse it to your account. Typically, this process takes around three days.

How to get loan approval with a low CIBIL score?

Worried about low credit score impact on loans? Well, if your credit report doesn’t look too healthy, you can still qualify for a two-wheeler loan. Given that the motorcycle itself serves as collateral, lenders may consider your loan approval under certain conditions. 

Check out how you can obtain two-wheeler loan approval with a low CIBIL score.

   1. Pay a higher down payment

Down payment refers to the amount that you shell out before the bank finances the rest of the value of your two-wheeler. If the bank finances 90% of the value, you need to pay 10% of the motorcycle’s value as the down payment.

Consider paying at least 20% or 30% as a down payment. This would reduce your risk profile and the lender might consider approving your two-wheeler loan. Making a higher down payment also reduces your EMI and interest rate.

   2. Co-apply with someone

If your CIBIL score looks poor, consider co-applying for the two-wheeler loan with someone with a better credit record. Many motorcycle owners also apply with a guarantor to ensure a fast loan approval. The creditworthiness of your co-applicant or guarantor can help you qualify for the motorcycle loan.

   3. Pay higher interest rates

Certain lenders might approve your two-wheeler loan at a higher interest rate even when your CIBIL score looks poor. In this case, you need to shell out a higher EMI. If you are comfortable with this financial outflow, don’t hesitate to take the loan. However, if you have other ongoing liabilities, consider extending the loan tenure. This would help you manage your payments with ease.

Conclusion

Now that you know how your CIBIL score affects your loan approval process, try to maintain a credit score of at least 700. Also, try to clear your ongoing liabilities so that your debt-to-income ratio remains low.

Obtaining a two-wheeler loan becomes easy when your CIBIL score demonstrates high creditworthiness. Check out low-interest loans with reputed banks and NBFCs and apply for your loan.