Low CIBIL score? Here is how you can still get a Loan against your car
A low CIBIL score is often seen as a red flag by most banks, mainly when you apply for unsecured Loans. But what if you urgently need funds and your credit score is holding you back? The good news is that you may still qualify for a Loan against your car, even with a poor credit history.
A Loan against Car is a Secured Loan where your existing vehicle is used as collateral. Let us understand how a Loan against car works and why it is a viable option even with a poor CIBIL score:
Why do banks consider a Loan Against a Car even with a low credit score?
When you apply for a Loan, your CIBIL score, which reflects your past credit behaviour, is an important metric. But in the case of secured Loans, the risk to the bank is lower because they can recover the amount by seizing your car in case of default. Here are a few reasons banks may approve a Loan against your car despite a low score:
- The car acts as a security, reducing the bank's risk.
- Banks assess the car's resale value and condition, in addition to your credit history.
- Car refinance Loans have shorter repayment periods of 12–36 months, enabling quicker recovery.
- A steady income can sometimes compensate for a poor credit score, especially for self-employed applicants.
Tips to get a Loan against a car with a low CIBIL Score
Let us look at specific ways you can still increase your chances of approval:
Choose the right bank
Not all banks treat low credit scores equally. Some banks specialise in Loans for low-CIBIL-score customers. Conduct your research and shortlist banks that prioritise collateral value over credit history.
Apply for a lower amount
If you apply for a Loan amount that is well within the resale value of your car, your chances of approval increase. For example, if your vehicle is worth ₹5 lakhs, applying for ₹2.5 to ₹ three lakhs will appear safer to the bank.
Show repayment capacity
Show proof of consistent income through salary slips, GST filings, or ITRs. If your debt-to-income ratio is low banks may overlook your CIBIL score. Stability of income matters more than the score in many secured Loan cases.
Co-applicant or guarantor
Adding a co-applicant with a good credit score and stable income can significantly improve your chances. This adds an extra layer of assurance for the bank and can also help you secure better Car Loan interest rates.
Conclusion
Having a low CIBIL score doesn't mean you are out of options when it comes to availing credit. A Loan against car is one of the most accessible, flexible, and affordable funding options when you need quick liquidity. Since it is a Secured Loan, banks are more willing to look past your past credit behaviour if you can show income stability, offer a reasonable Loan amount, and maintain transparency.