Car Loan Eligibility
Last Updated : March 29, 2017, 2:20 p.m.
The moment you decide to buy the car of your dream, you start looking at the offers of several lenders in terms of interest rates. It indeed is a good thing to do as you get an idea of the EMI, total interest outgo and the overall payment over the loan term, which is upto 7 years and 5 years for new and used cars, respectively. For example- ICICI Car Loan Interest Rate of 10.75%-12.75% or SBI Car Loan Interest Rate is feasible with 9.20%-9.25% per annum is feasible for most borrowers. But what about the eligibility? Doesn’t matter how attractive the interest rates may seem if you fall short of the eligibility, you may get denied a car loan from the lenders, bringing your dream of having a car to a halt. So, you have got an idea of how critical the role eligibility plays in your car loan approval from the lenders. Based on the age, income, work stability, business status and other factors, the lenders decide on your eligibility. Now the word eligibility can have wider connotations. The first thing that could be the interest of many is whether an individual deserves a car loan or not. If he/she is, the next factor to look at whether the loan amount they want can be disbursed to their account or not.
Car Loan Eligibility Criteria
Based on your income and repayment capacity, your eligibility for a car loan differs. Check out the eligibility factors as shown below.
| Eligibility Criteria | Description |
|---|---|
| Minimum age at loan application | 18 Years |
| Maximum age at the time of loan maturity | 60 Years for salaried & 65 years for self-employed and businessmen |
| Net income criteria | A Minimum of ₹ 10,000 per month onwards |
| Employment type | Salaried or self-employed |
| Stability | A minimum work experience of 2 years for salaried. Self-employed must be in the business for atleast 2 years |
| Type of car | Loan amount varies depending upon the newness or oldness of the car |
| Value of car | Based on the ex-showroom price or on-road price of new car and valuation of the old car, your loan amount eligibility varies |
| Residence / locality | Urban, semi-urban or rural |
| Stability | Minimum 1 year of stay at the current residence is required |
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.
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.
Category of Your Employer – If you are working in a Top Fortune 100 company of India, you put yourself in the right position to get a higher amount of loan as lenders will reckon your job stability to be good. If you do not belong to such companies, it is necessary you earn reasonably higher so that a higher loan amount could come running at your doorstep. Now that you know the critical factors you need to take care of while applying for a car loan, get yourself aware of the eligibility parameters set by select lenders in India.
Car Loan Eligibility HDFC Bank
HDFC Bank, which leads India’s car financing space with a share of 26%, offers a loan to buy standard to premium cars based on income and repayment capacity of the borrower. Like all, HDFC Bank has also set the eligibility criteria for a car loan. Want to check its eligibility norms? Glance through the table below.
| Criteria | Salaried | Self-employed |
|---|---|---|
| Age | 21-60 years | 21-65 years |
| Income | Minimum annual income of ₹ 2.50 lakhs | Minimum annual income of ₹ 2.50 lakhs |
| Work Experience/Business Status | Minimum job experience of 2 years with atleast a year with the existing employer | Been in the business for atleast 2 years |
SBI Car Loan Eligibility
Following HDFC Bank, it’s SBI that rules the space with a share of 22%. Loan for new passenger cars, sports utility vehicles (SUVs) and multi-utility vehicles (MUVs) and other models are up for grabs. Both salaried and self-employed classes can obtain a car loan from SBI. But before you head towards the public lender, let me get you aware of the eligibility criteria of SBI Car Loan.
| Criteria | Salaried | Self-employed | Agriculturist |
|---|---|---|---|
| Age | 21-65 years | 21-65 years | 21-65 years |
| Income | Net annual salary of the applicant and/or co-applicant, if any, together must be a minimum of ₹ 3 lakhs | Net profit or gross taxable income of ₹ 4 lakhs per year (Provision of clubbing the income of co-applicant exists) | Net annual income of applicant and/or co-applicant, if any, should be ₹ 4 lakhs |
| Max. Loan Amount | 48 times of net monthly salary | 4 times Net Profit or Gross Taxable income as per ITR after adding back depreciation and repayment of all existing loans | 3 times of net annual income |
Car Loan Eligibility in Kotak Mahindra Bank
Kotak Mahindra Bank, with a share of 16% in India’s car loan market, is ready to offer loans for both new and used cars to meet your unique requirements. At Kotak, you are all set to receive convenient and flexible repayment options, with loan amount available upto 90% of the ex-showroom price of new cars. At the same time, the bank finances upto 85% of the valuation of old cars. The attractive car loan scheme, though, would depend on how you shape up to the eligibility criteria set by the bank. Catch all that in a table below.
| Criteria | Salaried | Self-employed |
|---|---|---|
| Age | 21-58 years | 21-65 years |
| Income | You should have a minimum monthly salary of ₹ 15,000 | Minimum monthly income should be ₹ 15,000 |
| Job/Business Stability | Minimum job stability of 1 year is mandatory | Must be in the business for atleast 2-3 years |
| Residence Stability | You must have stayed in the current residence for atleast a year | A minimum stay of 1 year at the existing residence is required |
Car Loan Eligibility ICICI Bank
ICICI Bank is one of the top five car financing companies in India The bank offers a car loan to both salaried and self-employed classes. Want to take a car loan from ICICI Bank ? First get aware of the bank’s eligibility criteria by glancing through the table below.
| Criteria | Salaried | Self-employed |
|---|---|---|
| Age | 25-58 years | 28-65 years |
| Income | Minimum gross salary of ₹ 2.5 lakhs is required | Gross annual income should be ₹ 2 lakhs |
| Work Experience/Business Status | A minimum work experience of 2 years with atleast 1 year with the existing employer | Been in the business for atleast 3 years |
Car Loan Eligibility Axis Bank
Axis Bank, despite being placed at the bottom of top five car loan lenders in India, can be a handful option for car loan seekers as the bank lends upto 85% of the on-road price of the car. On some models, the financing can be upto 95% of the ex-showroom price, lessening the amount of down payment that you need to make while buying the car. Before going ahead to transact with the car dealer, make sure you are through with the eligibility norms placed by Axis Bank.
| Criteria | Salaried | Self-employed |
|---|---|---|
| Age | 21-70 years | 18-75 years |
| Income | Net annual salary should be atleast ₹ 2,40,000 | Minimum income of ₹ 1,80,000-2,00,000 is required |
| Job/Business Stability | A minimum 1 year of employment with the current organization is mandatory | Must be in the same line of business for a minimum period of 3 years |
These were all about the eligibility parameters for car loan offered by top lenders in India. But, do you know how banks calculate your eligibility? No, then you have come to the right place to understand the phenomenon.
Car Loan Eligibility Calculator
The calculation of the loan eligibility is contingent upon the income and savings you have. If you earn sufficiently higher and keep the expenses under control to generate maximum savings, the eventual loan disbursal amount could be more and help you to buy a car of your choice with ease. The loan amount will be calculated by the eligibility calculator, which first computes per lakh EMI. Want to how it gets calculated? The calculator comes up with per lakh EMI by using values of loan tenure and existing interest rate. If you wish to apply for SBI Car Loan, you can check the calculation below to know the per lakh EMI amount.
Amount- ₹ 1 lakh
Tenure- 7 years
Interest Rate- 9.60-9.65% p.a.
Per Lakh EMI- ₹ 1,640-1,642
Subsequent to computing the per lakh EMI amount, the values of savings are put into the calculator to find the eligible loan amount.
Suppose you earn a salary of ₹ 20,000 per month and maintain a savings of Rs. 10,000. In this case, loan amount eligibility will be calculated with the help of a formula mentioned below.
| Loan Amount Eligibility | ₹ 1,00,000 x savings/per lakh EMI |
|---|---|
| ₹ 1,00,000 x 10,000/1640= ₹ 6,09,756 (approx.) | |
| ₹ 1,00,000 x 10,000/1,642= ₹ 6,09,013 (approx.) |
So, you can receive a car loan of around ₹ 6,09,013-6,09,756 from SBI.
Other banks also follow the same or similar calculation methodology to decide the loan amount.
Used Car Loan Eligibility Calculator
New cars may not be affordable for some because of the soaring price tag that they come with. However, there is no reason to get disappointed as you have the option to buy a used car, which can also be called as a pre-owned car or a second-hand car. Banks from SBI to Kotak Mahindra Bank offers a loan to buy the used vehicles. Lenders finance almost 60%-80% of the valuation amount as assessed by the officer who goes out to survey the pre-owned vehicle you want to buy. The valuation amount is set based on the age and condition of the vehicle. The younger the car is with better condition, higher can be the valuation of the said vehicle.
The calculation methodology, which was used earlier to compute the loan amount on a new car, can also be applied to calculate the loan eligibility in the case of a used car. However, while buying a used car, you need to make sure the vehicle’s age is within 3-5 years. If that is not the case, the loan could well be denied from the lender’s end.