Buying your dream car is not that distant a dream these days. You can simply take a car loan and purchase your dream car without waiting. A car loan is a type of secured loan in which the lender finances the purchase of a car. The repayment for this loan is in the form of monthly installments. The car loan interest rate is affordable because this is a secured loan.
If you’re looking to apply for a car loan then you should take some time out to find out the car loan eligibility before you apply. Checking the lender’s eligibility criteria and making sure you meet it can help improve your chances of getting the application accepted. But, in case you find yourself not meeting the eligibility criteria, here are a few tips to improve your car loan eligibility.
Here are 5 tips to increase car loan eligibility:
- Joint loan application:
The most important criteria for a car loan is the income of the applicant. The car loan eligibility is decided based on the net income per month of the applicant. In case your monthly income is not enough to give you the loan amount you require for your dream car, consider making a joint loan application with your spouse or parents. The incomes of both the applicants is considered while making a joint loan application. By making a joint loan application with someone who has a high income will make you eligible to get a higher loan amount approved.
- Recheck your credit score:
Lenders generally consider credit score while assessing car loan eligibility criteria. Often times, there may be a delay in reporting repayments and other transactions by lenders to the credit bureau for the purpose of credit score. This can affect the credit score. Before applying for a loan, it is best to request a detailed credit report from a credit rating agency and recheck whether everything has been correctly reported or not. In case of any discrepancy, this can be reported to the credit rating bureau for rectification.
- Repay outstanding debts:
When it comes to loans, it is generally recommended to have not more than 50% of your monthly income go as payouts for EMIs. One point of due diligence that lenders do is to check existing debts and the type. Applicants with a lot of unsecured debts can find their application getting rejected. One way to strengthen your car loan application is to repay outstanding debts.
- Apply for a smaller loan amount:
Lenders do not finance 100% of the car’s ex-showroom price. They finance between 70% to 80% of the value. One way to improve your eligibility is to opt for a smaller loan amount i.e pay a larger down payment or finance a larger component of the loan out of your own resources. By opting for a smaller loan, the eligibility criteria are not as strict and may be easier to fulfill.
- Take a loan for a longer tenure:
One of the factors affecting the EMI of a car loan is the loan tenure. To make EMI’s affordable you can opt for a longer tenure. This will keep the installment amount small.
One of the best ways to check your eligibility is to use a car loan calculator. These loans calculate the EMI amount but some calculators also check your car loan eligibility based on your income and a few other parameters.