Two-wheelers are used by a large portion of the population to commute on a daily basis. Due to increased traffic, getting to schools, universities, and offices on time has become a challenge, making two-wheelers one of the most popular ways of transportation recently. The demand for two-wheelers has surged, as has the necessity for a two-wheeler loan, as the number of individuals wishing to travel fast and safely has increased.
You may not have trouble getting a lender to finance the automobile if you have a strong credit score. What if you have bad credit and need a motorcycle urgently? How are you going to discover a lender who would give you credit despite your bad credit?
Credit score for a two wheeler in India
Although there is no specific credit score for receiving a two wheeler vehicle loan, it is commonly assumed that a score of 600 or more will be accepted by all financial institutions. The credit score is a number that ranges between 300 to 900. The higher the number, the more likely you are to be approved for a two wheeler loan. When it comes to disbursing a bike loan, different banks have varying criteria or qualifying requirements. Maintaining a decent credit score is therefore recommended.
Impact of low credit score
A poor credit score, which is the minimal criterion, is one of the few reasons why many banks refuse an application for a vehicle loan or a bike loan. A few causes of bad credit are listed below.
Previous or existing loans
If you already have a bike loan or were previously rejected for a bike loan then immediately applied for another loan, your new loan application is more likely to be rejected. This may lead to a low credit score.
Credit card bills
Make sure you pay all of your credit card bills on time each month. The credit rating agency considers the outstanding payment to be past due. Your credit score can be lowered if you consistently have past due bills.
Many people are unaware that even one or two missed credit card payments can negatively impact your credit score. The bigger the amount of missed payments, the worse your credit history and credit score will be.
You may find yourself unable to make your payments owing to an unanticipated circumstance. For example, you could face unforeseen medical expenses or lose your job, making it difficult to meet all of your loan requirements. If you miss a payment, it will be noted on your credit report, resulting in a reduction in your credit score.
Multiple credit applications
When you apply for credit with many banks at the same time, your chances of getting a hard inquiry increase. Each unfavorable inquiry might significantly lower your credit score.
Ways to get a two wheeler loan with bad credit score
If you have a negative credit score and still need a loan, you’ll have to compromise on a few of the following points.
Higher down payment
You’ll have to make a higher down payment if you have a low credit score. A down payment is a set sum that you must pay for any bike loan you apply for. Banks often finance 80 to 90% of the vehicle through a loan, with the remaining paid as a down payment up front. Making a down payment saves you money on interest and shortens the term of your loan. Because the loan amount to be repaid is low, this is an appropriate alternative.
When it comes to selecting and comparing different lenders, it’s always a good idea to keep a few alternatives open. You can receive a two-wheeler loan with a better interest rate, terms, and conditions if you do enough research. A new approach of measuring the creditworthiness of borrowers has aided this process even further. Additional characteristics that banks and credit institutions look for include employment and a consistent income stream.
Negotiate better lending terms
There are a variety of reasons why you could have defaulted on a previous loan, and these factors can potentially affect your credit score. Even though the interest rate is slightly higher, it’s always a good idea to negotiate better loan conditions with your bank and bike dealer.
When granting a two-wheeler loan, several financial organizations use credit score as the primary factor. Bad credit could be the result of defaults from years ago that continue to affect your credit score now. Despite having a poor credit score, your financial circumstances may have improved, and you may be working steadily.