In India, 75% of the two-wheeler purchases are financed by bike loans. The loan segment in the Indian two-wheeler market is expected to grow at 11% every year. By 2025, it is likely to be worth $12.3 billion. Therefore, the two-wheeler loan market in India seems bullish. However, NBFCs have certain eligibility conditions that the borrowers must fulfill to take a two-wheeler loan. CIBIL score is one of them.
CIBIL score is an essential parameter that lenders consider while evaluating bike loan applications. It is a critical number that reflects an applicant’s past credit behavior. A high CIBIL score increases an applicant’s eligibility to apply for a higher loan amount at reasonable interest rates. Let us see what the minimum CIBIL score is for availing of a two-wheeler loan.
Why is CIBIL Score Important?
TransUnion CIBIL is India’s oldest and most reliable credit bureau. NBFCs check an applicant’s CIBIL score to assess their creditworthiness. Those who maintain a good credit history with proper financial management will have an excellent score above 750. Such applicants qualify for a higher loan amount and a lower interest rate. A bike loan EMI calculator helps select repayment tenure with easily affordable EMIs. Some lenders may also offer them zero down payment bike loans.
On the other hand, applicants with a lower CIBIL score will have a more challenging time getting bike loans from reputed NBFCs. They may face rejection from the lender or end up paying a higher interest rate due to the higher risk involved. Therefore, having a high CIBIL score goes a long way in getting a loan with favorable terms and conditions when it comes to a two-wheeler loan.
Minimum CIBIL Score Required
Although the minimum CIBIL score requirement varies from lender to lender, generally, lenders prefer applicants with a score of 750 and upwards. CIBIL score ranges from 300 to 900. The closer it is to 900, the better are the chances of getting a two-wheeler loan. Different lenders have varying eligibility criteria to disperse bike loans. Therefore, maintaining a good CIBIL score is advisable for prospective borrowers.
Benefits of Maintaining a High CIBIL Score
Maintaining a high credit score benefits an applicant in multiple ways.
- Higher Chances of Loan Approval: CIBIL calculates an individual’s credit score after evaluating their credit data and behavior. The closer the score is to 900, the better are the chances of securing approval.
- Higher Loan Amount: The loan amount an applicant qualifies for may get affected by their CIBIL score. The higher the score, the higher the loan amount the lender may approve.
- Lower Interest Rate: The interest rate is often the deal-breaker when it comes to applying for a loan. An applicant with a high CIBIL score stands a better chance of approval at lower interest rates. They can potentially negotiate with the lender and demand a reasonable interest rate on their bike loan.
- Easier EMIs: When the interest rate is low, the EMIs remain easy to repay without adding to the borrower’s financial burden.
- Faster Repayment: Use a bike loan EMI calculator to select the shortest possible repayment tenure with easily manageable EMIs. Choosing a shorter term allows loan repayment faster than a longer-term, making the borrower debt-free sooner.
Tips to Maintain a High CIBIL Score
After knowing the minimum CIBIL score requirement and the benefits of having a high credit rating, now comes the time to understand how to maintain a high score. Here are a few valuable tips that help:
- Maintain a consistent repayment history: All the loans and credit cards give credit to the borrower that they must repay within a stipulated period. Paying all EMIs and credit card bills on time helps maintain a consistent repayment history. It ultimately helps boost and maintain a high CIBIL score.
- Maintain a Low DTI Ratio: DTI stands for debt-to-income ratio. It is an individual’s percentage of income going towards their monthly financial obligations. A high DTI ratio projects an applicant as a credit-hungry high-risk borrower. Ideally, the DTI ratio should be less than 30-40% of regular income. Borrow minimum and repay on time to maintain a low DTI ratio and a high credit rating.
- Lengthen Credit History: The lenders want to see how long an individual has maintained credit responsibly. One trick is to retain old accounts even if they are no longer used. They will add to the credit length to improve credit scores.
The minimum CIBIL score to apply for a bike loan is 750 and above. It improves an applicant’s chances of getting easier loan approval with reduced interest rates. Therefore, before applying for a two-wheeler loan, use the tips mentioned above to improve your credit rating. Then, apply for a loan with a better standing and a higher approval rate. Easy access to a loan will let you own a dream bike sooner than you can think of.