Are You Eligible for a Car Loan

There’s a beauty you have your eye on, but you simply can’t afford it. After a lot of contemplation, you finally decide to buy it. A loan would be your best friend and it won’t be a strain. Everyone says, “Just take a loan, I did, too. It’s easy.” So you walk into the bank, fill out the form, only to hear “Sorry, sir, you are not eligible.” Your heart sinks, your car dreams lost. Well, worry not! There are ways to fix that.

Taking a loan, be it for a house, a car or a wedding, is no longer the way it used to be. There are stricter rules but there are better ways to get a loan! The perfect loan for you depends on you and your dream car. Before you take a loan, it’s wise to check your eligibility. On websites like BankBazaar, there are eligibility calculators that will take in your information and generate a list of eligible quotes. Using these calculators will give you a clear picture of where you stand when it comes to getting a loan. To use a car loan eligibility calculator, you need to provide details that include whether you have chosen a new car or a used car, the model, your city, employment, work experience, salary and incentives.You can then view if you are eligible for a car loan or not. If you are eligible, a list of quotes will be generated for you to view and compare before you make your choice. If you are not eligible for a car loan, here are some of the reasons and fixes.

Credit Score - Banks can reject your application if you have a low credit score. Low scores could be the result of defaults or late payments on EMIs and credit cards, too much debt, too many loan applications and enquiries, and generally bad credit behavior.

Fix: Find out your credit score by purchasing it online for CIBIL or any of the credit bureaus of India. You can then find out the reasons for your low score and take specific measures to fix it.

Insufficient Earnings - Banks set an eligibility criteria for applicants which stipulates a minimum income required in order to sanction a loan. The minimum income could vary between banks but is usually around Rs. 3 lakhs per annum and above.

Fix: You can add a co-borrower to the loan and their income will be considered in the loan application. You can add an immediate family member including your parents, children, siblings and spouse. Some banks may accept a third-party of good repute.

Salary is not deposited to the bank - Some banks require that your salary be wired to their bank every month, and only then will they approve a car loan for you.

Fix: There’s not much you can do here as the company generally makes the decision of where your salary is deposited. But if you have a bank account with the concerned bank, they will consider how much average quarterly balance you have maintained in your account and the dealings you carry out through their bank. A good amount of activity, balance, good behaviour, or even a fixed deposit with the bank can increase your eligibility.

Tips to increase your eligibility for a car loan

• If you offer a larger down payment, this lowers the risk for the bank. You increase your eligibility and can also reduce your interest rates.
• Check your credit score before you apply for any loan. You can then take measures to fix it if it is low way before you apply for a loan.
• Generally, only the hypothecation of the vehicle is required, but offering security or collateral can enhance your eligibility and your loan amount.

• If you fall below the eligible income bracket, try to add a family member’s income and make them a co-borrower in the loan.