Check Eligibility Criteria To Get A Car Loan

10 Feb 2023

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Owning a car is a dream of almost every individual in India. With the ease of securing loans, buying cars, either new or pre-owned, has become an achievable dream. Banks and other financial institutions are loaning sums to many for fulfilling aspirations. Is everyone eligible for car loans ? Banks make it possible for everyone to apply for and receive a car loan as long as they fulfil some criteria. Private and popular financial FinTechs are easier on the eligibility criteria for car loans if borrowers are willing to pay high-interest rates. Banks are safe and dependable sources for borrowing funds. They have thus minimised their requirements but continue to hold some as essential for ascertaining the eligibility of the candidate along with reducing their risk percentage while loaning to individuals. Let us talk about eligibility for car loans in greater detail.

Car Loan Eligibility Criteria

If you are wondering whether you fulfil the bank loan eligibility criteria, a glance through these pointers can help you get a better understanding. Before you start calculating the EMI or the types of car loans you require, go through these once.

Eligibility criteria:

The eligibility scores vary vendor-wise, however, the most common eligibility requirements by most vendors are these.

  • Age limit: The main applicant should be a minimum of 21 years, co-applicant can be 18 years old. The maximum age will be 65 years. 
  • Employment type: Permanent Salaried or Self Employed Applicant with 2-3 years of working experience
  • Nationality and residence: The applicant should reside in India or at least have a home in India (for NRIs / OCIs / POIs).
  • CIBIL: The candidate should display good credit history with a CIBIL score of 701 and above. Your worthiness increases with car loan eligibility CIBIL score

These broad car loan eligibility criteria apply to all individuals. But banks operate on more specific segregation working out car loan eligibility benchmarks based on your profession. Car loans for salaried persons and self-employed individuals are different. Read on to know in depth. 

Car Loan Eligibility for Salaried Individuals

For salaried individuals getting a car loan from a reputed bank is relatively easy for new passenger cars, multi-utility vehicles (MUVs), SUVs, etc. for private use. If you belong to a good company from either the private or public sector and have served your company for a few years with continuous service, you have a high chance of getting a car loan. So, we share a few pointers for car loan eligibility for salaried individuals:

  • The applicants should be employees of private limited companies, the government sector or public undertakings belonging to the state or the central governments 
  • The minimum age of the individual should be 21 years when applying for a loan. The candidate's car loan repayment tenure should not exceed 65 years of age.
  • The applicant should be in their job for 2-3 years.

For salaried individuals, the total deduction with EMI should not exceed  

Gross Monthly Income less than Rs. 50,000 60%
Gross Monthly Income Rs. 50,000 & above but less than Rs. 1,50,000 70%
Gross Monthly Income Rs. 1,50,000 and above 80%

Car Loan Eligibility for Self-employed Professionals

Self-employed individuals are divided into four sections enabling them to understand how to procure car loans. They can be sole proprietors, belong to partnership firms, be owners of private limited companies, or directors in public limited companies. So, let us look at the eligibility criteria for car loans individually.

Self-employed professionals as sole proprietors

  • Individuals or business owners attached to manufacturing, trading or services fall into this category.
  • These individuals should be over 21 years of age when applying for the loan and the car loan tenure must be within the candidate's 65 years. 
  • The business that they are running should be at least 2-3 years old

Self-employed Partnership businesses

  • Those falling in this category should be attached to manufacturing, trading or the service sector.

Self-employed individuals running private limited companies

  • This category should own private limited companies related to manufacturing, trading, and services.

Self-employed individuals in public limited companies

  • These individuals are directors of public limited companies involved in business like manufacturing, trading, or service.

Car Loan Eligibility for Self-employed Non-Professionals

Those offering tuitions, or working from home as freelancers, attached with home delivery of food or products, offering services of various kinds can also apply for car loans easily. For them, the car loan eligibility criteria are mostly the same.

The age limit should at which they can apply for loans should be 21 years, if applying with a co-partner, that person's age can be 18 years. The maximum tenure at which the car loan matures must not exceed 65 years.

Just like all self-employed individuals, the total deduction of the EMI should not exceed:

Average annual income (last 2 years) less than Rs. 6 lakhs 60%
Average annual income (last 2 years) is Rs. 6 lakhs and above 80%

Car Loan Eligibility Calculator

Most banks these days offer car loan eligibility calculators on their websites. This highly efficient tool helps individuals calculate car loan amounts easily. Individuals can adjust the figures to check the most suitable EMI, comfortably helping them to make easy repayment. The calculator contains three fields the loan amount, varying from bank to bank, rate of interest which is the differentiating factor for choosing your lender and the loan term is mostly stable in all banks of 84 months or 7 years. So, check your capacity and apply for the loan amount that will be sanctioned easily by the bank. Your income and EMI ratio should be maintained as mentioned in the division. Once the payment is over you can be the proud owner of your car.

Do not forget to keep your expenses on a tight budget if you wish to fulfil the loan amount without any defaults. Calculate your expenses accordingly. This is how the Car loan EMI calculations work:

For example, you have taken a loan for Rs 10 lakh and intend to repay it in the next 7 years at an interest rate of 12%, just enter these figures in the EMI calculator and generate the EMI instantly to ₹17,653.

Car loan calculators calculate the loan amount to determine preowned and new car loan eligibility. While buying a preowned car ensure that the age of the car must not exceed 5 years.

Factors affecting Car Loan Eligibility

While banks make car loans easily available for all individuals, not everyone falls under the bank's eligibility criteria. Read carefully through the factors that could affect loan-taking capacity.

  • Essential for car loan seekers is the credit score. Lenders lay a lot of emphasis on the CIBIL score as this is an assurance of the repayment capacity of the individual and lowers lending risk for banks. 
  • The type of car you are purchasing decides the eligibility factor. The car's resale value along with its features and specifications matters to the car financer. If the car you purchase has a high resale value, it increases the loan eligibility factor. While considering the eligibility, the resale value is held as important as a car is an asset which goes through value depreciation. The higher the value the greater will be its resale cost. 
  • Service and business durations are important factors. Car loans for salaried employees require a minimum working experience of 2-3 years and 1 year of experience in their current company. 
  • Self-employed business owners should be in the same business for at least 2-3years. 
  • The applicant will be considered for vehicle loan eligibility only if the income level is high enough to pay the EMI timely and unfailingly. If the employee earns less and may enter into the loan jointly, the car loan eligibility criteria could depend on other factors or get a lower loan amount. 
  • An employer's reputation is an important factor in seeking a loan. If the salaried employee is from a top-notch multinational or public sector, like railways, or a reputed bank, loan eligibility is not even considered. If the employee can make monthly paybacks, loans are extended immediately by banks. If you do not work under a highly reputed employer, you should have a high income and build your reputation in the bank to ease loan eligibility. 

Why opt for BOB Car Loan

The Bank of Baroda offers one of the most attractive car loan features. Applicants seeking a loan from the bank can apply for loan amounts of up to 100% (on selected models) of the on-road price. Loan amounts up to Rs.500 Lakh (5 crores) are available from the bank. This gives individuals the opportunity to buy the most expensive cars. The bank calculates the interest rate on a daily reducing balance which is dependent on the CIBIL Bureau score of the borrower. The minimum car loan eligibility CIBIL score is 701. Borrowers can repay the loan in a tenure of 84 months and set their EMI accordingly with help from the EMI calculator. Auto loans require no collaterals as the bank hypothecates the vehicle until full loan payment. Once the borrower completes the entire payment the bank removes hypothecation. The bank has made it possible for a wide list of individuals like salaried employees, businessmen, professionals, corporates as well as NRIs / PIOs / OCIs to apply for car loans. The eligibility age for car loans is 21 years at the time of application and the maximum age of full repayment must not exceed 65 years. This extensive period proves to be extremely convenient for borrowers. The bank has brought down processing charges to a minimum. Bank of Baroda will support you through the loan procurement process with online and offline assistance. Offering the best rates with car loans; documents kept to a minimum. Contact Baroda Car Loan and get the fastest car loans.

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Car Loan Foreclosure & Prepayment Process

While car loans are a great way of purchasing high-end new or used cars, repaying the loan is a responsibility that keeps borrowers on their toes. A good plan of repayment will help lenders systematically manage their EMI without delaying or defaulting. Once you calculate your EMI, based on the types of car loan , new or pre-used, ensure you have a well-researched repayment plan ready. No matter what the size of your loan, a properly researched repayment plan will increase the loan sanction eligibility from banks. Following the EMI repayment tenure that the bank has set, is one way to pay back a major part of the full loan through prepayment or foreclosure, closing the loan can ease a bit of the borrower’s pressure. Banks and financial institutes annually allocate large funding towards loans . Thus, repayment and foreclosure are attached to certain terms and conditions as lenders incur losses through foreclosure or part payment. The loan process rests upon an agreement where the borrower agrees to pay regular EMI to the bank or the lender, so borrowers may have to pay car loan closure charges when they choose these repayment options. Banks offer borrowers the flexibility to pay off the entire or part of the loan balance ahead of the term reducing the interest liability. In this article let us explore these repayment processes that lenders offer to borrowers.

Documents for a Successful Car Loan Application

Applying for a car loan is a great way to own a car and repay by manageable EMIs. Loans are a powerful instrument planned by financial institutes like banks, for borrowers who can aspire to a better living by planning and calibrating expenses to achieve better material goals. Loan eligibility comes with certain criteria and documents are needed to qualify a candidate for a loan. The documents are evidence of loan eligibility and a transaction between the borrower and the lender.

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