Two-Wheeler Loan for Low Credit Score: Best Tips for Loan Approval

Are you dreaming of owning your own two-wheeler but low or poor credit score holding you back? While having a satisfactory credit score is important for securing better deals on bike loans, you can still get a loan even if your credit is not in the best shape. 

In this blog, we will guide you on how to get a bike loan approval with low credit score. However, please note that having a good credit score (any score above 750) is absolutely necessary if you want to enjoy a hassle-free two-wheeler loan journey with favourable terms and conditions. 

Understanding the Impact of Bad Credit Score on Two-Wheeler Loans 

Your credit score plays a significant role in determining your eligibility for a bike loan. A good credit score, typically above 750, increases your chances of loan approval. However, if you have a bad or poor credit score, below 600, the likelihood of getting approved for a loan decrease significantly. 

1. Reasons for a Low Credit Score 

Various factors can contribute to a low credit score. Poor repayment history, multiple credit entries at once, and a high amount of unsecured loans are some common causes of a bad credit score.

For instance, consistently missing payments or defaulting on previous loans can negatively impact your credit score. Similarly, applying for multiple loans or credit cards simultaneously indicates financial stress and may result in a lower credit score. 

Additionally, having a large amount of unsecured debt without collateral can also lead to poor credit scores. Evaluating these factors is important so you can work on improving your CIBIL score.

2. Impact of a Low Credit Score on Bike Loan Approval 

A low credit score can significantly affect your chances of securing a two-wheeler loan. Before approving a loan application, banks consider credit score to determine an individual's creditworthiness. Here's a breakdown of the chances of bike loan approval based on different credit score ranges: 

• More than 750: Higher chance of approval
• 700 - 750: Good chance of approval
• 650 - 600: Approval based on additional factors
• Less than 600: Very low chance of approval

As you can see, maintaining a decent credit score is crucial for obtaining a bike loan at favourable terms. However, don't lose hope if your credit score is less than ideal. There are strategies you can employ to improve your chances of loan approval. 

Loan Approval Tips for Getting a Two-Wheeler Loan for Bad Credit Score

1. Increase the Down Payment 

One way to enhance your chances of getting approved for a two-wheeler loan for bad credit is by increasing the down payment amount. A higher down payment reduces the overall loan amount and shows the lender that you are committed to repaying the loan.

For example, let's say you want to purchase a bike worth ₹80,000 and your credit score is low. By offering a larger down payment, such as ₹60,000, you can reduce the loan amount to ₹20,000. This reduces the bank's risk and increases the likelihood of loan approval. 

Pro Tip: Invest in short-term Fixed Deposits or set up a Recurring Deposit to accumulate funds specifically meant for loan down payment.

2. Find a Co-signer 

If your credit score is not up to par, having a co-signer with a good credit score can significantly improve your chances of securing a two-wheeler loan. A co-signer is someone who agrees to take responsibility for the loan if you default on payments. 

Banks may consider the co-signer's creditworthiness when assessing your application. Therefore, having a financially responsible co-signer can boost your chances of loan approval. Please note that not all banks offer this facility.

3. Negotiate with the Bank 

If you have genuine financial difficulties that led to a poor CIBILscore, consider explaining your situation to the bank. Be transparent about your past financial challenges and demonstrate a willingness to make timely repayments moving forward. 

In some cases, banks may be willing to negotiate the terms of the loan or offer alternative solutions, especially if you have a long-term relationship with the bank. This option should be considered as a last resort, but it can potentially help you secure a two-wheeler loan for bad credit.