Buying a car through a car loan is the easiest way today, since it arranges the upfront money you need for it and then divides it into easily payable instalments. However, the loan eligibility criteria have become tougher than it was before. Banks and financial institutions determine a borrower’s loan repaying ability on different basis and then finalise the loan amount and interest rate.
Follow these simple steps and improve your chance of getting the car loan you want.
Pay your debts on time
All banks and financial institutions like customers who pay their dues on time. If you already have a loan, such as a home loan or personal loan, make sure you pay your EMIs on time. Same goes for your credit card bill. Not only will you avoid high penalties, but this clean record will also help convince your lender that you are credit-worthy and are likely to pay your instalments on schedule.
Arrange down payment and documents
Some finance lenders expect you to pay around 15 to 20% of your car’s value, while they finance the rest. Make sure you have the funds in place before you apply. Volkswagen Financial Services offers up to 90% finance on its group cars, thus lowering your hassle of arranging for a higher down payment amount. An important thing to keep in mind is to get a list of documents required for loan application and keep them ready. This will decrease chances of your application being rejected.
Enhance the loan tenure or term
Opting for a longer term is the most common method to increase loan eligibility. Since, the higher term results lower monthly payments on the same interest rate and principal amount. Lower EMIs enhance borrower’s payment ability and loan eligibility.
Improve your credit score
If you have a low credit score, you can fix it by ensuring you have closed previous loans and by addressing any errors in your credit report. Meanwhile, use the credit limit on your credit card prudently. In fact, a good practice would be to ask your credit card company to increase your credit limit. This may have a positive impact on your score.
The eligibility for a car loan can also be enhanced by combining or clubbing incomes of family members like spouses, mother, father or son to apply for a bigger amount loan. Let’s say if your individual loan eligibility is around ₹ 10 lakh and your requirement is ₹ 20 lakh, show the combined income of two or more individuals of your family.
Borrowers are recommended to compute their variable income as well, such as performance-based incentives and others. This will significantly enhance your individual loan eligibility.
Following the above given suggestions, you can easily improve your eligibility for car finance in India. However, one should also be aware of their financial situations and planning while applying for a car loan.