Depending on your car loan eligibility, you can avail as little as Rs. 1 lakh and as much as Rs. 3 crore or more in funding. Car loan eligibility criteria varies per bank, so it's important to compare lenders so that you find the best bank or car loan financing company for your needs and qualifications. Read our guide to understand what car loan lenders consider when determining your eligibility.
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What is Car Loan Eligibility?
Car loan eligibility determines whether you qualify for a loan and subsequently impacts your total cost of borrowing. On one hand, applicants must meet the eligibility criteria of their lender of choice to be approved for a car loan. On the other, both details of the borrower, as well as the vehicle they wish to purchase, will be considered when determining the loan amount and car loan interest rate.
Eligibility Criteria for Applicants
There are a number of criteria that lenders use to determine your car loan eligibility, including your age, current and past financial status, and even how long you've resided in your current residence. Click on the criteria below to learn more about how it affects your car loan eligibility.
While most lenders provide car loans to borrowers from all backgrounds of employment, car loan eligibility criteria often differs based on whether you're salaried, self-employed, an agriculturist, or a corporate customer. Before applying for a car loan, make sure to confirm the age and income requirement for your employment type.
The amount of years you've worked with your company is also considered by some car loan lenders. You may have to prove that you've worked with your company for up to 3 years. In the case of salaried employees, some banks prefer you to have worked for at least one year with the same employer.
Finally, your employment status determines how your total loan amount will be calculated. Take the SBI New Car Loan as an example, as shown below.
SBI New Car Loan Eligibility
|Employment Type||Maximum Loan Amount|
|Agriculturalists||3x net annual income|
|Salaried||48x net monthly income|
|Self-Employed||4x net annual profit or gross taxable income|
To determine your interest rate and capacity to pay your car loan EMIs, lenders will look at your income, CIBIL score and EMI/NMI ratio. Car loan income requirements range between Rs. 15 lakhs and Rs. 40 lakhs per month, or Rs. 1.8 lakhs to Rs. 4 lakhs per annum. Depending on the lender, this includes the income of your spouse or co-applicant, as well.
Some lenders prefer to use your credit score as a deciding factor; for example, Bank of Baroda does not have an income requirement, but instead a minimum CIBIL score requirement of 701. As a rule, borrowers with a large and stable income, in addition to a high CIBIL score, will be able to avail the largest loan amounts at the lowest car loan interest rates.
Lastly, lenders will use an EMI/NMI ratio to calculate your total loan amount. An EMI/NMI ratio is your equated monthly instalment divided by your net monthly income, which shows your EMI as a percentage of your monthly take home pay. Borrowers with a high EMI/NMI ratio have greater car loan eligibility, but lenders often cap the ratio at 50% to 70%.
The age requirement for a car loan is between 18 and 75 years old. However, you will find that most banks enforce an age requirement of 21 to 60 for salaried borrowers, and 21 to 65 for self-employed borrowers. It's important to note that you can not exceed the maximum age by the end of your loan term, or loan maturity.
For generous age requirements, check out the Union Bank of India car loan.
Most car loan financing companies only lend to resident Indians, as opposed to non-resident Indians (NRIs) and Persons of Indian Origin (PIO). However, some lenders like Union Bank of India and State Bank of India have NRI car loan options.
In addition to place of residence, some lenders may ask you to prove a duration of at least 1 year.
Often, banks and other car loan lenders give preferential pricing to existing customers. Borrowers with pre-existing home loans or car loans, for example, are given interest rate concessions. Similarly, salary account holders and priority banking customers can skip over documentation processes and receive instant approval for their car loan.
Below, you can find car loan lenders who offer preferential pricing to existing customers.
Your chances of being approved for a car loan will increase if you apply with a co-applicant that has a large, stable income or high CIBIL score. If you are in need of a car loan but do not have the most eligible profile, we recommend that you apply with a co-applicant.
It's important to keep in mind that some lenders have eligibility requirements for co-applicants, as well. For instance, only certain members of your family can apply for a car loan with you.
Eligibility Criteria for Cars
Before you apply for a car loan, you need to ensure that your lender finances the vehicle you wish to purchase.
Most lenders finance passenger cars, multi-utility vehicles (MUVs), and some imported cars. Additionally, some car loans can be used for two-wheelers and three-wheelers. However, not all lenders will finance commercial vehicles, yellow plate cars, or models that are out of production.
Some car loan lenders have sourcing partners, which allow borrowers to find cars directly on their website. ICICI Bank, for example, is partnered with CarDekho, Maruti Suzuki, Hyundai, Ahindra, and KIA.
Read More: ICICI Bank Car Loan
Age of Car
Borrowers who are seeking to purchase a used car should keep in mind that car loan lenders have a maximum age requirement for vehicles. Most lenders finance used cars between the ages of 3 and 5 years. Although, HDFC Bank finances second hand cars up to the age of 10 years, as long as there are no more than 3 previous owners.
Car Loan Eligibility Calculator
Many lenders provide a car loan eligibility calculator on their website, which helps borrowers calculate the total loan amount they can avail. You will need to input your personal information and income details to receive an estimate.
A car loan eligibility calculator is not a car loan EMI calculator. If you would like to calculate your car loan monthly payments, click here for more information.
Check Car Loan Eligibility Criteria for Top Banks
Eligibility Criteria for Salaried Borrowers
|Annual Income||Rs. 3 lakhs, including income of co-applicant||Rs. 3 lakhs, including income of co-applicant and spouse||Rs. 2.4 lakhs|
|Employment Stability||Not advertised.||2 years total and at least 1 year with current employer||1 year|
Eligibility Criteria for Self-Employed Borrowers
|Annual Income||Rs. 3 lakhs, including income of co-applicant||Rs. 3 lakhs||Rs. 1.8 lakhs for selected models, Rs 2 lakhs for others|
|Employment Stability||Not advertised.||2 years||3 years|