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How To Get A Used Car Loan With A Bad Credit Score


by Mahindra Finance


June 15, 2024


4 mins read


Owning a car is not just a luxury but also a necessity in today's fast-paced world. However, obtaining a car loan can be challenging if you have a bad credit score. A poor credit score can reduce your chances of loan approval and make it difficult to secure favourable terms. But don't worry! In this article, we will guide you through the process of getting finance for used cars with bad credit scores.

Here are the 6 tips to help you get finance for used cars:

Tip 1. Check your credit score

Before applying for any loan, it's important to know where you stand financially. Start by checking your credit score through one of India's credit bureaus. This will give you an idea of how lenders assess your creditworthiness. If you have a bad credit score, take steps to improve it before approaching lenders for a used car loan.

Tip 2. Compare lenders

Different lenders have different standards when it comes to approving loans and offering used car loan interest rates. It's crucial to compare lenders and their offerings before making a decision. Use online prequalification tools to check used car loan eligibility, which provides an estimate of loan terms without affecting your credit score. This way, you can choose the lender that offers the most favourable terms for your situation.

Tip 3. Consider a cosigner

If your credit score is hindering your chances of getting finance for used cars, consider adding a cosigner to your application. A cosigner is someone with good credit who agrees to take responsibility for the loan if you default on payments. Having a cosigner can improve your used car loan eligibility and increase your chances of getting approved for a loan.

For instance, imagine you have a friend or family member with a good credit score who is willing to cosign your used car loan application. This person's credit history and financial standing will help offset the risk associated with your bad credit score. As a result, lenders may be more willing to approve and provide affordable used car loan interest rates.

Tip 4. Get loans from other financiers

You may also consider a car loan from an NBFC. They offer competitive rates, flexible terms, and quick approvals, making it easier to drive your dream car home. Ensure you compare options to find the best fit for your needs.

Tip 5. Know how much you can afford

When considering finance for used cars, it's important to calculate how much you can afford on a monthly basis like EMIs, insurance costs, maintenance expenses, and fuel charges. The monthly payment for a used car loan EMI depends on factors like the loan amount, interest rate, and repayment period.

To determine this amount, consider using an online affordability calculator or consult with a financial advisor. They can help you figure out the maximum loan amount you can comfortably repay while meeting your other financial obligations.

Tip 6. Choose a dealership preferred by lenders

When purchasing a used car, it's best to find a dealership that is preferred by your lender. You will get favorable rates and other discounts on your car purchase. Talk to a number of dealers associated with your lender.  


Securing finance for used cars with a bad credit score may seem challenging, but it's not impossible. By following these tips and understanding how lenders assess creditworthiness, you can improve your chances of getting approved for a loan with favourable terms.

When considering options for used car loans in India, Mahindra Finance offers attractive solutions tailored to individual needs. With flexible repayment options and competitive interest rates, Mahindra Finance is an ideal choice if you are looking to finance your dream car with low credit scores credit scores.


Q1. Can a CIBIL defaulter get a car loan?

Yes, CIBIL defaulters can apply for car loans. If not possible from banks, then at least from loan aggregators.

Q2. Can I get a loan with a 500 credit score?

Certain lenders may accept a credit score of 500, but one should meet additional criteria, such as a minimum income or employment history.

Q3. What is the minimum CIBIL score to buy a car?

Although there is no definite score to get a car loan, most lenders prefer a score of above 750. However, some lenders may finance a car with a score below 750 

Q4. What is the car loan eligibility?

The used car loan eligibility in India for a person is at least 21 years old and not more than 70 years old. The net annual salary should be at least Rs. 2.4 lakh p.a.

Q5. Can I get a car loan without CIBIL?

There are still chances of getting a car loan without CIBIL. You must provide your latest bank statements that reflect your income and increment in salary. 

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