Being an entrepreneur or working as a freelance professional can be an overwhelming, challenging and yet a rewarding experience. In such scenarios, you do not always have the luxury to depend on a fixed paycheck at the end of the month.
You may recompense yourself only when you hit a good deal or sign a lucrative contract. But funds flow issues are bound to crop up every now and then until you receive the whole payment for your particular sale. Hence applying for a car loan can entail factors that do not exist in regular personal circumstances for the self-employed individual. For instance, if the car is used for business purposes, getting a self-employed loan can pay off the auto insurance as well as the EMIs until you are paid from the other end.
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Self Employed Car Loan Eligibility:
- The applicant should be of at least 18 years old.
- The applicant can be as old as age 75 at the end of loan tenure, which is more than what is allowed for salaried people.
- The applicant should have relevant experience in the same line of business for at least three years. Again, this can vary slightly from bank to bank.
- The income requirement depends on the car model you are intending to purchase. But most banks insist on a minimum income of INR 1.8 Lakh per annum for the cheapest model. This can be relaxed at the sole discretion of the bank.
- The applicant’s most recent ITR papers are also taken into consideration.
Documentation required for a Self Employed Car Loan:
- A duly filled application form
- A passport sized photograph
- Copies of national ID cards bearing signature and photo as age proof and ID proof
- Address proof (ID card, rental/ lease agreement or utility bill)
- Income papers like bank statements of the last 6 months, computed income for the past 2 years validated by a C.A, acknowledged IT papers, reference and contact details of clients
- Address proof of the firm (Utility bill, copy of Shop & Establishment Act certificate, SSI Registration certificate, Sales Tax certificate)
- Pro-forma Invoice or Rate List
- Post Sanction / Pre Disbursement Documentation
- Duly signed loan agreement along with RTO set
- Receipt of margin money paid
Features and Benefits of Self Employed Car Loans:
- There are two kinds of car loans for self-employed, namely, secured and unsecured.
- The applicant can avail for one that suits his/ her requirements and the loan will be sanctioned without much of a credit check.
- There is no frantic paperwork or endless documentation except for a few personal information if you are applying online. Car loans for independent earners are popular precisely for this reason of easy access and prompt authorization.
- Your personal details will stay secure and private and all the related information will be sent to your mail or phone or both.
- The quantum of loan will get credited to your account directly without any delay.
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How to calculate EMI for your Self Employed Car Loan:
Every bank website has a handy EMI calculator using which you can calculate EMIs (Principal + Interest). By entering required information like your monthly income, this tool will give you a choice of EMIs for various tenures.
- How can I know Self Employed Car Loan Status?
The bank will see to it that you are updated and informed about the processing of your loan application and in case they don’t, you can call the office directly. You can also visit their website and check your application status.
- Where do I get the Self Employed Car Loan Application Form?
Once the eligibility criteria is met, you can either collect the form from your nearest bank branch directly or download the form from the website.
- Can I get my Self Employed Car Loan Statement Online?
You can easily request for an e-statement of your car loan online by entering your email id. They will also text you the same.
- Are there any Self Employed Car Loan Prepayment Charges (Pre-closure Charges)?
This is solely at the discretion of the bank. Some banks charge a nominal fee while some don’t.
- Is there any Self Employed Car Loan Tax Deduction?
There are no tax benefits stated under section 80D on any auto loan. Hence there will be tax deductions accordingly. As per the Income Tax Act 1961, if the car is bought for business purposes, then interest can be capitalized. Hence you are entitled to claim depreciation under section 32.
There are some specific concerns for self-employed individuals when it comes to vehicle loans. At times, self-employed loans are beneficial to those who run their own business to bridge the gap between client payments and when bills are outstanding. Auto loans for entrepreneurs can help them pay off the essential bills, and then reimburse the loan once the customer has repaid. Hence, this loan option is also a welcome breather for struggling entrepreneurs.