When buying a car is in the mind, then car loan also seeps into our thoughts effortlessly. Buying a car and availing a car loan go hand in hand in most cases. We can also say that car loan helps us to fulfill our wish of owning a car. Many banks and non-banking finance companies provide car loan as one of their services. A car loan is a loan taken to purchase a car and is quite similar to any other loan such as personal loan, home loan etc. in terms of aspects like tenure, the rate of interest, EMIs, eligibility criterions and the like.
The borrower can avail a car loan to buy either a new car or a pre-owned car, and the variant of the car could range from a small car to an SUV or an MUV. The general eligibility criterions to apply for a car loan includes borrower’s income, the age of the borrower, type of the car – new or used, employment stability, the value of the car, and availability of mandatory documents.
Various factors aside, but a common thread that runs across car loan – new car or used car – is that no bank will offer a 100% loan. This means that you have to make a down payment of a certain amount. Usually, a down payment of 10 – 20% of the total amount of the car is appreciated by dealers and lenders, alike. This means financial stability is one of the key considerations you need to be mindful of while availing car loan. Based on the source of income, borrowers are classified as salaried professionals - one who is employed in a public or a private sector company; and self-employed professionals - one who owns his own business. Though the minimum income slab differs for both, however, the borrower must have a stable income of minimum Rs. 1.2-lakh per annum. Though this slab may differ from one lender to another, higher the income better is the chance to avail a higher loan amount and regular income improves chances for loan approval too.
For example, to avail Tata Capital new car loan, a salaried individual must have a minimum annual income of Rs. 2.5-lakh and a self-employed individual must have a minimum annual income of Rs. 2-lakh. But, to avail, Tata capital used car loan a salaried professional should draw a minimum salary of Rs. 3-lakh per annum whereas a self-employed professional should have a minimum income of Rs. 2-lakh per annum.
Along with source of regular income, both salaried and self-employed professionals must provide proof of income and proof of income tax paid. As proof of income, the borrower can submit latest salary slips, bank statements or audited statements of accounts depending on the type of employment. As proof of income tax paid, the borrower has to submit Form 16 or ITR forms depending on the type of employment – salaried or self-employed.
In order to avail a car loan, it is crucial to meet the above-mentioned financial criterions. These criterions determine your eligibility to avail a certain amount of loan and your capability to repay the loan amount on the basis of EMIs. These criterions are also a way to assess your credibility score pertaining to basic financial obligations. As a borrower of a car loan, unless you meet all the financial criterions and provide all finance-related mandatory documents, your loan application will not get through the approval stage. Thus, before applying for a car loan, it is important to ensure that you pay heed to all the criterions so that you are able to avail the necessary funds to purchase your dream car.