Car Loans for Unemployed Individuals

The eligibility criteria for a car loan usually includes a minimum net annual income of Rs.3 lakh for salaried applicants and Rs.4 lakh for self-employed applicants. An applicant must be aged between 21 to 65 years, have a good credit score, receive a steady income, and hold a stable occupation to be eligible for a car loan. It is true that obtaining a car loan when you have a steady income can take some effort let alone zero income. However, for whatever reason, if you are unemployed at the moment, you can still get an auto loan from a bank.

Unemployed individuals can get auto financing for the purchase of a new car or a used car of their choice from banks, non-banking financial companies (NBFCs), and auto dealerships in India. Whether you are employed or unemployed, driving a car that is not roadworthy could lead to vehicular accidents. It is better to replace the car with a roadworthy new or second-hand car. Here are some tips through which an unemployed individual can get a car loan:

• Show an alternative source of income: Some lenders may approve your car loan application if you had an alternative source of income like pension, disability income, an interest income from a Fixed Deposit (FD) or a return on investment.
• Maintain a good credit rating: Lenders look for an applicant’s credit score and credit history to gauge his or her creditworthiness. If you maintain a good credit score and a good credit history with no outstanding dues or bankruptcy filings, then lenders may approve your car loan application. 750 or above is considered to be a good credit score. To improve your credit score you must make loan EMI payments and credit card bill payments on time. Pre-closing a loan before the end of its tenure, skipped or delayed EMI payments, and multiple loan rejections can have a negative impact on your credit score. Another way by which you can improve your credit score is by maintaining a balance between a secured loan (car or home loan) and an unsecured loan (personal loan).

• Show stable residential proof: When applying for a car loan, you are required to submit identity proof, age proof, address proof, and income proof along with the duly-filled and signed application form to the bank. If unemployed applicants could show residential stability wherein you have stayed in the same residence for more than 1 year then the lender may be willing to approve your car loan application.
• Make a large down payment: Putting down a large down payment on a car of your choice can increase your chances of car loan approval. A large down payment can also reduce the overall cost of your car loan. If you can get the money needed to make a significant down payment, the lender may be more inclined to approve your car loan even without a steady income.
• Opt for a Car Loan against FD: Apply for a car loan against FD wherein the lender (bank) treats the loan as an overdraft facility against the deposit sum. If you have a joint Fixed Deposit account, you must get the written consent of the other account holder to apply for a car loan.
• Opt for a Loan against Car: Apply for a loan against car wherein you can pledge your old car as collateral to obtain an auto loan in order to purchase a new car. Banks offer loans against cars for a loan tenure of 1 to 3 years at an interest rate of 14-15% p.a. approximately. You can get a maximum loan amount of up to approximately 150% of the original loan value of the car that you are putting up as collateral.
• Get a co-signer for your car loan application: If a co-signer with a good credit score and a steady income can serve as security/guarantee for your car loan, then lenders may approve your car loan application.
• Get an auto loan against property: Another way by which you can get auto financing is by pledging your property or gold to obtain a car loan which can be used to purchase a new or used car of your choice.
• Opt for a used car or a low-priced new car: As you know, the price of a new car is higher than a second-hand car. There are organised auto dealerships in India who sell certified and well-maintained second-hand cars. If you are purchasing from a private seller then ensure the car is not a stolen property or one with unpaid debts.

Car loans for unemployed individuals may have a higher interest rate and smaller loan amount than the regular auto loans. You may have to pay more in interest and down payment. Save money to make a large down payment. If you are applying for a car loan at the bank that you are banking with, then negotiate with your bank relationship manager for a better car loan interest rate.