What is Car Loan

Car Loans – The finance availed of to buy either a new or a used car is known as car loans. car loans is pretty much what you think it is: It is a personal loans, the proceeds of which are used to purchase an automobile. More specifically, a lender loans the borrower the cash it takes to purchase a vehicle. In return, the borrower agrees to pay back the lender the amount of the loan plus interest, usually in monthly payments, Car Loan until the amount owed is fully paid off.Car Loan

Types of “Car Loans”

1. For purchase of a new car
2. For purchase of a used car
3. Loan against an existing car

“Car Loan” Required Documents-

  • Salaried Individuals:

    • Any of the following Car Loan identity proof documents:
      • Aadhar Card
      • Passport
      • PAN Card
      • Voters ID Card
      • Driving License (recent, legible, laminated)
    • Latest salary slip and Form 16 as income proof
    • Any of the following documents as address proof:
      • Aadhar Card
      • Ration Card
      • Driving License (recent, legible, laminated)
      • Voters ID Card
      • Passport Copy
      • Telephone Bill
      • Electricity Bill
      • Life Insurance Policy
    • Bank statement of the previous 6 months
  • Self Employed Individuals (Sole Proprietorship):

    • Any of the following identity proof documents:
      • Aadhar Card
      • Passport
      • PAN Card
      • Voters ID Card
      • Driving License (recent, legible, laminated)
    • Latest Income Tax Returns (ITR) as income proof
    • Any of the following documents as address proof:
      • Aadhar Card
      • Ration Card
      • Driving License (recent, legible, laminated)
      • Voters ID Card
      • Passport Copy
      • Telephone Bill
      • Electricity Bill
      • Life Insurance Policy
    • Bank statement of the previous 6 months
  • Self Employed Individuals (Partnership Firms):

    • All the following documents as income proof:
      • Audited Balance Sheet
      • Profit & Loss Account of the previous 2 years
      • Company ITR for the previous 2 years
    • Any of the following documents as address proof:
      • Telephone Bill
      • Electricity Bill
      • Shop & Establishment Act Certificate
      • SSI Registered Certificate
      • Sales Tax Certificate
    • Bank statement of the previous 6 months
  • Self Employed Individuals (Private Limited Companies)

    • All the following documents as income proof:
      • Audited Balance Sheet
      • Profit & Loss Account of the previous 2 years
      • Company ITR for the previous 2 years
    • Any of the following documents as address proof:
      • Telephone Bill
      • Electricity Bill
      • Shop & Establishment Act Certificate
      • SSI Registered Certificate
      • Sales Tax Certificate
    • Bank statement of the previous 6 months
  • Self Employed Individuals (Public Limited Companies):

    • All the following documents as income proof:
      • Audited Balance Sheet
      • Profit & Loss Account of the previous 2 years
    • Any of the following documents as address proof:
      • Telephone Bill
      • Electricity Bill
      • Shop & Establishment Act Certificate
      • SSI Registered Certificate
      • Sales Tax Certificate
    • Bank statement of the previous 6 months.

Factors Affecting Car Loan Eligibility

Income Levels – Based on the income of the borrower, the loan amount to be disbursed from the lender side can vary. Obviously, when you have a greater income sufficing the payment of EMIs without any discomfort, the loan amount disbursal can be more. However, when the income levels are not much to deal with the pressure of higher EMIs, the lender would most probably offer a comparatively lower amount of loan so that the repayment from your side can be a lot smoother.

Stability of Income – When the lenders sit down to assess your eligibility based on income, they not only check the quantum of your earning but also the stability of your work be it as a salaried or self-employed. Higher the stability, greater are the chances of more loan amount coming your way.

Car Type – The eligibility also varies on the type of cars you are looking to buy. As you would know, there are a wide range of cars in passenger car, hatchbacks, sedan, Sports-utility Vehicles (SUVs), Multi-utility vehicles, and other segments. The cars, which figure in these segments, are expected to have a different resale value based on the engine performance and other features.

Obviously, when you are buying a new car whose resale value is on the higher side, the loan amount eligibility goes up substantially.  So, when you are set out to buy a car, choose a model based on the resale value, which you can check online. A car, without doubt, is a depreciating asset and comes down in value with time. Therefore, the resale value is such an important criterion while deciding the eligibility.

Car Loan Eligibility

Credit History – All your hard work of obtaining a car loan can go down as waste if you have a poor credit history resulting from a default in payments of other loans or credit cards in the past. So, make sure you maintain a good CIBIL score preferably 750 and above to get the car loan approved from most lenders.

Employment Status for Salaried – When it is the case of a salaried, the concerned individual is supposed to have worked for atleast 2-3 years while being in the current job for a minimum 1 year to convince most of the lenders for a smooth approval of the loan.

Business Longevity for Self-employed – Self-employed professionals or businessmen must stay in the same line of business for a minimum of 2-3 years to get the approval for a car loan.

Relationship with Lender – The efficacy of relationship with the lender can either be a gain or loss-making proposition for you. If you are applying for a car loan at a bank with whom you already have a fruitful journey in the form of CASA or other products, you could then negotiate for a higher loan amount at competitive interest rates.

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