How CIBIL Score Can Affect Your Car Loan

Cibil and car loan rates, both are interlinked. Cibil is credit information bureau of India limited, and the main purpose of this agency is to preserve and present the entire history of an individual repayment history for all the banks and financial institutions who are its members.

This information is provided to the cibil by these banks only and all this information is provided to them on personal request whenever any person applies for ant credit facility, to check the payment track record of that person.

On the basis of the payment history, every individual is issued a score and this score is known as cibil score. This score reflects the overall status and commitment towards the debts of an individual and plays a very crucial role is getting you a car loan.

Your auto loan rate depends a lot on your credit or cibil score, but it is not also the only factor on which your interest rate would depend. The score ranges from 100-900 and on basis of your repayment status and regularity, credit bureau issues a score to you.

* Your car loan rate will be higher if your cibil score is low and would be lower if your cibil score is high. For this we will have to understand the complete scoring system. Your score is considered to be good or high, if it is 700 or above and it is considered to be lower or bad, if it is less than 500. Anything between 501-699 is said to be an average credit score. Your lender while assigning an interest rate on your car loan does take into consideration, your score.
* Cibil and car loan are interlinked in this way. Your lender would charge low rate on your car loan, if your cibil score is high (700 or above). On the other hand, if your score is about average (501-699), then the rate charged would be slightly high but there won’t be a much difference. Now, if your score is bad or poor; which is less than 500, then your lender would charge a very high interest rate on your car loan.

The reason behind this is, people with high or average scores are considered to be high profile people and the risk factor involved is less as in case of low score profiles. High rate is charged to recover some good amount of money in fewer Emi’s only, so that if in case the borrower stop making the payments afterwards, the bank would not be in complete loss.