The most common method of buying a car in India is by taking a car loan from the bank or a non-banking financial company. Approximately 80% of cars are financed. There are two types of car loan:
Secured loan: in this type of loan, security, or collateral is required to get a loan. The security can be in the form of your land, home, or any valuable asset. Most lenders keep the car itself as a security. This means that the lender will legally own your car if you fail to repay your loan. Also, in this case, the car loan interest rate is less as the lender has less money on risk.
Unsecured loan: this is the opposite of a secured loan. This loan doesn't require any kind of security or collateral. These are personal loan which is used to buy a car. The interest rate is very high on this type of loan as risk increases on these kinds of loans. So, to cover these risks, the bank charges a high amount of car loan interest rate.
To apply for a car loan, you must cover a few eligibility criteria:
AGE: The age of a loanee must be 21-65.
EMPLOYMENT: for obvious reasons as in to give the EMI, the loanee must be employed in a registered organization or shall be self-employed in a registered organization.
EMPLOYMENT TENURE: the loanee must have completed 6-12 months of tenure in their current organization to indicate their permanency in the organization and job security.
INCOME: the loanee must have an income of an average of 15,000 Rs
If you think to get a loan for an expensive car, then you are required to have a self-owned house.
Lone tenure must be a minimum of 6 months and can be a maximum of 60 months.
Maximum loan amount to sanctioned can be up to 95% of the total amount of the vehicle.
Factors affecting your loan eligibility:
Credit score: credit score is directly proportional to eligibility. The higher your credit score, the higher will be your loan eligibility.
Previous loans: large unpaid dues will have a huge effect on your loan eligibility. This is because of the non-payment of the loan, your credit score decreases, you are considered as a defaulter.
Income: income is also directly proportional to eligibility. The higher the income, the higher are your chances of eligibility. Higher-income can also lower your interest rate as the lender gets a little bit of assurance that the borrower will repay the money.
Ways to improve your car loan eligibility :
Maintain a higher credit score
Choose a longer repayment time
Opt for a joint loan
Show additional income sources.
Suggestion: Axis Bank Car Loan has the most lenient eligibility criteria and also have a variety of repayment options
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