If you are planning a take a new vehicle or want to replace your vehicle following the SC order, here are a few measures which can ascertain your chances of getting your car loan approved.
With the Supreme Court banning 10-year old diesel and 15-year old petrol vehicles in the NCR, some of you must be thinking of replacing your old vehicle with a new one. To make it easy for you, we have listed a few measures which can ascertain your chances of getting your car loan approved.
Fetch your credit score
A credit score is termed as a three-digit number which represents your creditworthiness basis your credit history. The lenders endow a rating to assess the feasible probability that you will repay your debts. A good credit score must be 750 and above, as this score reflects your repayment capacity.
Fetch for your credit report online for free from the credit bureau or lending marketplace before you apply for the car loan. This will inculcate you with relevant knowledge about your credit score from before, enabling you to take corrective steps to ameliorate it.
The NBFCs and banks effectively check your credit score before they approve your car loan application. The higher your credit score, the greater is the possibility to get your loan approved. Hence, it is necessary for you to ensure that your credit score is good before you submit your car loan application.
Arrange down payment and documents
Generally banks expect you to pay up to 20 per cent of the car’s value while they make the remaining payment. You must make sure that you have funds before you submit the application. Though there are a few lenders who provide up to 100% funding, it is advisable for the borrowers to fund some part of the cost themselves. The higher you fund, the lesser you would need to borrow and repay along with the interest, which generally goes as high as 16% pa.
For the documents you must refer to the bank’s website and keep them ready. This step lowers the chance of your car application being rejected.
Income and work history
Like credit score, your income and work history may not immediately dictate whether you will get the approval, but they certainly reveal the loan terms your lender is willing to offer. For example, if you are a salaried individual, you may require to be employed for no less than 2 years to be eligible for car loan. Likewise, self-employed individual in proprietorship firms or private or public limited companies must have a total turnover of not less than Rs 3,00,000 pa to be eligible for a car loan.
Borrowing loan more than your affordable limit minimizes the effective odds of getting your loan approved. To figure out your capacity, you must identify the loan EMI by using car loan EMI calculator. A car loan EMI calculator constitutes to be a digital instrument on the lenders ’website. By entering your loan details like the loan tenure, principal amount and rate of interest, you can get your loan EMI.
Apply for a car loan with a co-applicant
Applying for a car loan with a co-applicant can assist to meet the standards of car loan approval. Including a co-applicant signify that the income of the co-applicant is merged with your income. This ameliorates your creditworthiness assisting you to avail a better rate of interest. Therefore, you might ask your family members, parents or partner to co-sign the car loan agreement with you.
Make your existing loan repayments on time
At the time of approving your loan applications, the lenders check whether you have any previous debts. They try to spot out if you are repaying your credit card bills and prevalent loans on time. Missing the EMI or delaying the loan payment causes a mark in your credit profile turning you away from taking loans, which thereby decreases your credit score. Hence, it is recommended to repay your existing loan EMI on time. Having a satisfactory repayment history ameliorates your possibility of getting your car loan approved.
When you opt for a car loan, you must be sure to perform a thorough research on your credit score, employment status, repayment capacity, payment history, et cetera. Imbibing a fine knowledge regarding the details of car loan approval standards increases your possibility of availing a car loan.
Follow the measures given above to improve your possibilities of getting a car loan. Once your car loan is approved, utilize the disbursed sum to buy a car and drive your dream vehicle without witnessing any type of financial constraints.
(By Sahil Arora, Business Head-Payment Products, Paisabazaar.com)