Avail Car loan

Owning a dream car can be realized by taking car loans. A car loan helps to get your favorite Car by borrowing money from banks and other lenders and repaying it in a small amount on an installment basis. In India, the lender will consider a few criteria to check your worthiness to repay the loan amount. Like a personal loan, the car loan has certain criteria like eligibility, good credit score, EMI calculator, etc. So, let us take a detailed glance at the factors that are widely considered while availing of a car loan.

What is the importance of a credit score in getting a car loan?

The three-digit number will most importantly influence your creditworthiness to repay the car loan. Having a good credit score of above 750 will get you an instant car loan at a low-interest rate. The chance of approval is high if you have a good credit score. The advantages of a good credit score are;

Chance of less rejection:

As The credit score is the measure of creditworthiness, the lender will check the loan applicant’s credit report before sanctioning the loan amount. If the person has a high credit score the chance of approval is high but in case of a low – credit score, the loan application will be rejected as he/she has failed to pay the previous loan repayment.

Influence the interest rate:

As a personal loan, the credit score will influence the interest rate on the car loan. Having a high credit score above 750 will make you a great creditworthy person. The lender will charge a low-interest rate if you have a good credit score.

Loan amount:

The lenders will offer Higher loan availing options for a person with a good credit score. A loan applicant with a low credit score may not get the option to avail of the desired loan amount.

Other advantages:

The person with a high credit score will enjoy added advantages like special offers, discounts, zero down payment options, low processing fees, etc.

What is the best credit score for a car loan?

Generally, a good credit score will range from 700 to 750.

750-900          Enables to negotiate for low-interest rates and high loan amounts.   Quick loan approval   Low processing fees  
600-749          Lenders approve car loans but also note the income, occupation stability, and how many existing loans.
300-599          The chance of rejection is high.   Some lenders will offer the lesser loan amounts at high-interest periods with collateral security.  

The types of car loans

  1. New car loan:

There are many banks providing loans for getting new cars. The rate of interest will differ according to the car variety. The usual interest rate will range between 8 and 15 %. Each bank will provide loans at different interest rates. 

  • Used car loan:

If you want to get a used car you may get up to 90 % of the car’s valuation as a loan. But the rate of interest on these old cars is higher than the normal cars. The interest rate will range from 8 to 16 percent which is quite a higher rate than new cars. The repayment duration is up to eight years.

  • Loan against the car:

Availability of a loan against your old car will enable you to have instant access to a new car loan. Here the interest loan rate is higher than other car loans. Lenders charge an interest of 14 to 15 % per annum.

Eligibility of Car loan:

The eligibility of car loans are the following;

  • Should have a good credit score above 750.
  • The minimum age is at least 18 years.
  • The maximum age of eligibility is 60 years old with a monthly salary.
  • The car loan applicant should earn at least Rs 10000 per month
  • The minimum annual income is Rs 3 lakhs.
  • Salaried or self-salaried can opt for a car loan.

Benefits of car loans:

Flexible tenure period:

The tenure period can be chosen as per the loan applicants choose. Many banks offer a tenure period of up to 7 years. Every individual has a choice to pick the convenient tenure period.

Negotiable interest rate:

The car loan’s interest rate can be negotiated with the bank if you have a good credit score.

No security needed:

No collateral is required to avail of a car loan. Here the vehicle will act as the security for the loan amount availed so in case of a loan default the bank will seize your vehicle.

Choose payment method

Here you have the choice to pick the convenient modes of payments like cash, online payments, EMI modes, auto-debit method, etc.

Loan for a used car

In-car loans, the applicant has the full right to lend money to purchase a new car. But the interest rate will be higher than the rate on new cars. In the case of loan-to-value, the ratio on old cars will be lower than the new cars.

Documentation that is required to avail of car loan:

  1. The basic requirement is application forms, proforma invoice, passport size photography of the applicant, and KYC documents.
  • Sign the application form and paste your passport-size photo on it.
CriteriaEssentials
Identity proofAadhaar card PAN card driving license passport Voter ID  
Age proofBirth certificate 10/12 leaving certificate Driving certificate Schooling certificate  
Income proofSalary slip Income tax return document Form 16 Bank statement of 3-6 month
Address proofValid passport Permanent driving license Voter ID card Job card issued by NREGA

As earlier discussed, credit score plays a vital role while getting loans and credit cards. In the case of car loans, we have thoroughly glanced at their importance, eligibility, credit score requirements, and benefits.

Meta description:

Do you know how the credit score influences the car loan? Having a good credit score above 750 will help you to get any type of car loan. Some of the major eligibility is a stable income and a minimum annual income of 3 lakhs.

By admin

Leave a Reply

Your email address will not be published.