As the Indian economy evolves and moves towards becoming the third largest in the world after the US and China so are the aspirations and wishes of Indian youth. Having a car hence is now more than a status symbol. It adds convenience and elevates one’s lifestyle.
In this ever evolving growth environment there are numerous options through which a borrower can avail car loans. Still, having a low credit score or a weak credit profile can easily bring down chances of loan clearance.
Points to keep in mind while applying for a car loan
Before going ahead with a car loan application with a designated bank or financial institution, it is crucial for applicants to always keep in mind their basic customer rights, credit score, loan repayment potential, applicable interest rates on loan repayment along with other important factors so as to ensure they are able to make informed decisions.
Standard eligibility criteria set by banks for car loan applicants
- Age: 21–65 years.
- Income: Minimum ₹2 lakh annually.
- Experience: 1 year for self-employed, 2 years for salaried individuals.
- Existing customers with proper documents, no pending loans and reasonable credit score may get pre-approved loans with minimal documents.
For this all one needs to submit is their KYC i.e., Know Your Customer papers. To make things easier for applicants most of the financial institutions are open to accepting digital applications.
Further, the above listed points with regards to the eligibility criteria are not exhaustive. Loan applicants are advised to refer to the official websites of their respective banks or financial institutions along with their customer support teams to understand the policies, interest rates, repayment tenure along with other regulatory requirements needed to be met for availing a car loan.
What are the documents required for a car loan?
Submission of valid documents such as PAN card, Passport, Aadhaar, Voter ID card along with utility bills and income proof (salary slips, bank statements, ITR submission details etc.) is required for the successful submission of the loan application.
The financial institution providing the car loan will clearly define the documents they need along with other regulatory requirements needed to avoid rejection of the loan application. Once the applicant abides by the same his or her loan will be approved.
What is the meaning and role of a credit score?
A credit score simply reflects a loan applicant’s repayment ability. Hence, a score of 750+ is ideal, whereas a score of 650 or below is treated as a poor score. Factors like payment history, credit utilization, past loan history, along with other related things define this score.
Further, some banks and Non-Banking Financial Companies (NBFC’s), also have provisions of approving a car loan by treating the car as a collateral.
How can you improve your credit score?
- Paying EMIs and credit card bills on time with no delay.
- Avoiding multiple loan applications simultaneously.
- Maintain a clear balance between secured and unsecured loans.
- Consistently keeping spending below 30% of one’s credit limit.
How to get a car loan with a low credit score?
- Carefully compare interest rates to find the best deal.
- If in doubt consult a certified financial professional for help.
- Make a higher down payment to reduce costs.
- Only borrow within your repayment capacity.
- Go for pre-approved loans from your bank or consider second-hand cars.
Improving one’s credit score remains the most cost-effective way to secure a car loan in a seamless way and fulfill the aspiration of car ownership.
Note: Raising a loan comes with its own risks. So, due caution is advised
