Owning a car is seen as a milestone in one’s life. Apart from its practical usage, a car is like a symbol of independence and financial gratification. A car makes the daily commute comfortable and helps commuting from point A to point B without relying on public transport. With rising average income, more people are aspiring to buy cars. But not many people have the financial ability to buy a vehicle by paying its full amount. This is where the new or used car loan comes into play that enables a person to own a car by paying EMI for the entire tenure of the loan period. Banks and NBFCs disperse loans after checking your vehicle loan eligibility. There are some conditions based on which a vehicle loan is sanctioned. Let’s learn about some factors of vehicle loan eligibility.
Car loan eligibility
To check new vehicle loan eligibility, you must first know some minimum requirements which are very crucial for car loan approval. To be eligible for a vehicle loan, an individual must be a minimum 18 years of age up to a maximum of 60 years of age at the time of loan maturity (conditions apply). Also, a person must have a minimum of 2 years of employment and a minimum of 1 year of continuous employment. Also, a minimum annual salary of Rs, 2,40,000 is required for auto loan eligibility. Also, you need to have a good Credit Score to land a loan at a good rate of interest.
What is Credit Score?
A credit score is a statistical number which directly evaluates a consumer’s credit repayment ability based on their credit history. Lenders use credit history to evaluate whether the person will be able to repay their debts in time or not. Credit score ranges from 0 to 900. The credit score below 350 is seen as low credit score and lenders are less likely to provide a credit to an individual with low credit score. On the other hand, an individual with high credit score is more likely to be approved of a loan.
How to check your Credit Score?
There are many lenders that offer the chance to check your credit score online at free of cost.
Go to any of the online lender sites that allow you to check the credit score. Then fill in the basic details asked in the form. After you have filled your basic details, the Car Loan Eligibility Calculator will give you a score in the range of 0 to 850. Here are what different credit scores mean:
- Range from 0 to 400 – A credit score in the range of 0 to 400 is quite low. There is a high probability that your loan application get rejected.
- Range from 400 to 650 – A credit score in the range of 400 to 650 implies that the credit score is enough for a lender to trust your loan repayment ability.
- Range from 650 to 850 – A credit score in the range of 650 to 850 establishes a strong trust in the mind of a lender. The score means to the lender that your loan repayment ability is very high. There is a good chance that you will land a good deal on the loan and there is room to negotiate.
How to increase your Car loan eligibility?
A low credit score can delay your dream of owning your choice of vehicle. If you have a low credit score, do not panic, you can always improve your credit score and increase your chances of securing a vehicle loan. Here is how you can improve your chances of getting a vehicle loan. Just follow these simple steps:
Clear your debt on time
The customers who pay their dues before the due dates automatically come in the good books of the lenders. If you already have an ongoing loan such as a home loan or a personal loan, make sure that the EMI’s are paid on time, otherwise, your credit score would go down. The timely payment of debts, EMI’s helps to avoid penalties and increase the trust of lenders in your financial health.
Arrange necessary payments and required documents
Most of the banks and other financial lenders expect you to pay around 15% to 20% of the total car value, while rest of the amount is financed by the lenders. So, make sure you have the minimum amount of money to get a car loan.
Also, there are some documents that are necessary for your loan approval. You can check the list of required documents from the Credit website. Some of the necessary documents include – PAN card, Aadhar card, three-month bank statement and residence proof. If you do not have these required documents, no financial lender will be able to lend you a car loan.
Buy from a reputed dealer
Many reputed dealers have tie-ups with various banks and financial lenders, so getting an auto loan will be comparatively easier if you buy a vehicle from those outlets.
Sneha Sharma is a writer currently associated with Droom Technology. She writes about various topics such as auto news, trends in automobile industry, auto finance and so on. She has a prominent existence and excellent participation on different social media platforms.