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 easy installments. However, with increasing interest rates, the loan eligibility criteria have become tougher than it was before. Banks or car financing companies determine a borrower’s loan repay ability on different basis and then finalize the loan amount and interest rate. In order to understand how to increase your car loan eligibility, perform the below given self-assessment.
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 loan amount. Lower EMIs enhance borrower’s payment ability and loan eligibility.
Improve your credit score and repay other outstanding loans: A poor credit history and other outstanding loans might affect your car loan eligibility. However, you can improve your credit score by paying your credit bills on time and minimizing debts.
Clubbing incomes: The eligibility for car loan can 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 Rs. 10 lakh and your requirement is Rs. 20 lakh, show the combined income of two or more individuals of your family. For more accurate calculation, you can use a car loan eligibility calculator.
Step-up loan: In step-up loan, a borrower pays lower monthly payments in initial years and the amount increases in the second half of the loan term. Usually, banks and car financing companies consider the initial years’ lower EMIs for calculating the eligibility for loan. For example, if you borrowed a loan at 5.0% for a 12 years amounting to Rs. 10 lakhs, then for first 2 years you will have a monthly payment of Rs. 8, 550 and Rs. 10, 130 for the rest of loan term.
Perks: 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 his or her financial situations and planning while applying for a car loan.