What Are Eligibility Criteria For Car Loan?

Posted by Arjit Chalmela on August 23rd, 2019

Are you looking to buy a car, but are worried by the high prices? Well, don’t be. You can simply opt for a car loan and buy whatever car you dream of.

A car loan is one of the most popular loans that lenders give out. There are three types of car loans that lenders generally give out:

• New car loan
• Used car loan
• Loan against car

This loan is a secured loan which means the car is hypothecated with the lender. In case of any default by the borrower, the lender can seize the car and dispose it to recover the loan proceeds. However, this is the last resort for the lender.

Generally, the lender does not finance the entire ex-showroom price of the car. Only around 65% to 80% of the price is financed by the lender. This is called Loan to Value and it means the percentage of the security that is financed by the lender. But before you apply for a car loan, it is important to check the eligibility criteria.

Car loan eligibility:

The lenders generally specify an age limit for the borrowers. This ranges between a minimum age of 21 years to 25 years and a maximum age of 60 years to 70 years based on the lender.

A certain minimum salary per annum or minimum income per annum is required to apply for car loan. Business owners may require continuous profits for the last few years.

Most lenders require at least one year of continuous employment or business. Some lenders may require a higher number of years of operation of business for self employed loan applicants

A minimum period of residence in the city is also required before applying for a business loan.

The car loan interest rate depends on the borrower’s car loan eligibility. If the borrower does not have a high income or already has outstanding loans, the lender may give loans but at a higher rate of interest. A borrower with strong financials and repayment capability will get a car loan at competitive rates of interest.

One of the best ways to check your car loan eligibility is to use a car loan EMI calculator. This calculator will tell you how much loan you will be eligible for. It will also tell you the monthly instalment for a given loan amount. Using this calculator is very simple and it is available free of cost on the lenders websites.

Once you assess your car loan eligibility, you can apply for a loan either online through the lender’s website or offline by visiting the lender’s branch