How to Increase Your Car Loan Eligibility?

Be it a short-distance or long-distance travel, having a car of your own can be very convenient. From commuting to the office on weekdays to going on long road trips on weekends, with a car loan you can purchase a car of your choice to meet your traveling needs. Imagine not having to put up with the hassle of accessing public transportation, expensive private cab hires or the cost of damages to a rental car. Auto finance is available for the purchase of most makes and models of passenger and commercial vehicles in the Indian market.

Whether you wish to buy a new car or a used car, given the rise in prices of passenger cars across top carmakers this year, it is not surprising that consumers are leaning towards auto financing to realise their automotive dreams. To purchase a car of your choice, you can apply for a low-interest rate new car loan or used car loan from a reputable lender. To be eligible for a car loan from a bank or a non-banking financial company (NBFC), there are 3 major factors that one should consider - minimum annual income requirement, a stable occupation, and a credit score of 750 or above.

What is the Car Loan Eligibility Criteria?

To apply for a car loan, the applicant must meet the following eligibility requirements:

• Age criteria: Any individual aged between 21 to 65 years (he or she must not be more than 65 years of age at the time of loan maturity).
• Income criteria: In the case of a salaried individual, his or her (and a co-applicant's) minimum net annual income must be Rs.3 lakh or above. A self-employed applicant's net annual income must be minimum Rs.4 lakh.
• Work experience requirement: The applicant must have minimum 2 years of work experience in his or her field.
• Credit score: Having a credit score of 750 or above can help you get a low-interest rate car loan as the credit score represents the creditworthiness of the applicant.

The maximum loan amount that a self-employed or salaried applicant can apply for depends on his or her annual/monthly income.

Why is it Important to Check your Car Loan Eligibility?

Before applying for a car loan, it is advisable to check your car loan eligibility so as to avoid loan rejection. Multiple loan rejections will definitely have a negative effect on your credit score. At the time of processing a car loan application, lenders check the credit score and credit report of the applicant. Too many loan rejections, outstanding dues, and bankruptcies in one’s credit report serves as red flags to the lenders. Banks and NBFCs will hesitate to lend car loan to applicants with a bad credit report. Also, applying for multiple loans at the same time indicates financial desperation on the part of the applicant. That is why, it is better to check whether you meet the car loan eligibility criteria of your chosen lender before applying for a car loan.

How to Check Car Loan Eligibility?

Car loan eleigibility criteria differs from lender to lender. After picking a reputable lender, visit the official website of the bank or NBFC to check your car loan eligibility online. For each type of car loan - new car loan, used car loan, and loan against car, the eligibility criteria varies. The online car loan eligibility calculator is easy and simple to use. All you have to do is enter the make and model of car, your age, income, and occupation. Click on the 'calculate' button and get an instant result.

How to Improve your Car Loan Eligibility?

What happens if after checking your car loan eligibility online, you find out that you aren’t eligible for a car loan? Make a note of the type of requirement (age, credit score or income requirement) that you are lacking in and work at improving your car loan eligibility. Here are a few valuable tips on increasing your car loan eligibility:

• Opt for pre-approved car loans: Lenders compete with each other to provide better services to customers in the form of minimal paperwork, instant loan approval, and loan disbursal in an effort to attract and retain them. Banks offer pre-approved car loans to existing customers. If you apply for a car loan at a bank that you are already banking with, then you don’t have to worry about exhaustive paperwork or delay in loan approval.
• Maintain a low debt-to-income ratio: A low debt-to-income ratio is one wherein the loan EMI payments must not exceed more than 50% of your income. The debt-to-income ratio is used to analyse an applicant’s loan repayment capacity. Therefore, it plays a major role in increasing your car loan eligibility.
• Maintain a good credit score: As previously mentioned, an applicant’s credit score is another factor that affects his or her car loan eligibility. To improve your credit score, maintain a balance between secured and unsecured loans, make credit card bill payments and EMI payments on time, don’t preclose car loans before loan maturity, don’t default on any (personal, car or home) loan.
• Make a high down payment: If the applicant is willing to make a high down payment on the car of his or her choice, the chances of car loan approval are higher.
• Choose a suitable loan tenure: A short loan tenure means higher EMI payments and lower interest payments whereas a long loan tenure means lower EMI payments and higher interest payments. Use an online car loan EMI calculator to help choose a suitable loan tenure. The chances of car loan approval are higher for short loan tenures.
• Opt for a co-applicant: Ensure the co-signer or co-applicant has a good credit score and annual/monthly income. Having a co-signer serves as a guarantee for your car loan repayment. Thus, increasing the chances of car loan approval.

Apply for a car loan amount that you can afford to repay. An applicant’s car loan eligibility helps the lender determine the maximum loan amount, interest rate, and tenure. Visit a reliable third-party comparison website to compare various car loan offers and choose one that offers a low interest rate, zero processing fee, a suitable loan tenure, and flexible repayment options.