10 Tips to Save Money on Car Loan: Short Tenure, Low Interest & more

Decade earlier, owning a car was considered a luxury. However times have changed now. With increased earnings of Indians and growing distances, car has become a necessity belonging now. And as more and more companies are offering newer models, there is plenty of choice available for the interested buyers. And with plenty of loan options available in the market, buying the same has become more convenient.

Buying a car involves too much research especially the pricing part. But many people often forget that little bit of more research on car loan is also essential. Planned research is very important while seeking vehicle financing as it can save good amount of money provided your budget is fixed.

Here are some pointers on saving money when taking a car loan:

Do market research & compare prices:

Always do price comparison check at multiple lenders. And select lender offering best rate. While doing this – check for interest rate, processing fee, pre-payment fee and others.

Check Credit Report:

This one is for individuals who are seeking loan and not buying car by making full payment beforehand. First and most important thing to do is getting the credit report from the credit bureaus. By doing this you will come to know about the possible shortcomings in your credit profile. You can get credit report from official CIBIL website.

Many banks also offer credit report facility such as ICICI Bank, HDFC Bank. Details are available on their website.

  • Here’s the link of ICICI Bank to check credit score (Copy & paste it in your browser for opening) – https://www.icicibank.com/Personal-Banking/debt-service/credit-score.page
  • Here’s the link on HDFC Bank with an offer of 10% cashback on accessing credit report- https://www.hdfcbank.com/htdocs/common/NetBanking/cibil-cashback.html

Avoid taking credit report from any third party services. If you already have taken credit then getting your credit rating checked is very beneficial.

Additional reading: car loan for CIBIL defaulters.

Reason why credit report should be first checked is car loan rejection and its implications. After making a loan application, if you come to know that your credit score is poor then chances of your application getting rejected increases. And this further leads to negative reporting in the banks data. And same status is sent to the bureaus.

Bargain on interest rate:

This tip works best for existing loan customer. If you are a regular EMI payer, then chances of bank reducing the interest rate are higher. Even if you are not an existing customer, you should still bargain for lowering the interest rate.

Do not every time trust on dealer:

When you buy car, dealer will offer car loan as per his/her choice. However this deal offered by the dealer may not be the best one. So always compare rates and select loan which is at your advantage in terms of money.

Do not over cross the budget:

Fancy items are always attractive. Same holds true for car. There are various car with fancy designs available in the market with varying price ranges. However one thing you should keep in mind is buy a car within your budget. There is absolutely no point in buying expensive car and pay large sum.

Read about minimum income required for car loan.

Do not apply with multiple lenders:

If the loan application gets rejected, then often people apply at multiple lenders. But this is a big mistake as your credit score gets impacted. Lenders report this to credit bureaus. Banks or any other loaner hates credit hungry borrowers.

Choose shortest tenure:

Earlier you repay the entire loan amount, higher would be the savings. By choosing the shortest tenure, you can save good amount of money on the interest as total money outgo will be on a lower side.

Make a down payment:

Try to make as much down payment possible. Higher the down payment, lower would be the car loan amount. And hence higher savings as interest payout largely reduces.

Car loan against fixed deposit:

If you have FD account with the bank and do not want to break it; then you can utilize the same to get car loan. Few advantages of FD against traditional loan are – interest rate offered is low; so higher savings, no processing fee is applied, documentation is not cumbersome, etc. Most importantly you will continue to get interest on the FD account.

Consider personal loan for car:

This is also an option and has it’s own pros such as car ownership remains with you, when you do not have money to make down payment and many more. Read it here.

Always remember that car is not an asset. Its value (i.e. price) decreases the day you buy it and further decreases as it ages. So try to save as much money you can on car loan EMI.

9 Ways to Save Money on Car Loan – Down Payment, Low Interest & more

The cost of four wheeler is very high. And if you are planning to take a loan and include other charges such as interest rate, processing fee, etc. the overall cost further increases. And all these charges are unavoidable. And that’s how lenders earn profit.

So how to save money on car loan?

When considering taking loan for car (new or second hand), you should look for following ways to save money:

Make higher down payment: Make as much down payment possible. So for e.g. if cost of car is Rs. 7, 00,000 (7 Lakhs) and bank is ready to offer 100% loan amount. Then you will have to pay interest on the whole amount i.e. Rs. 7, 00,000. However if you make a down payment of Rs. 2, 00,000; then your monthly EMI burden will straightaway reduce. This is because you will be paying interest on the borrowed amount of Rs. 5, 00,000 only. So try to make as much down payment possible. Utilizing the money received via bonus or salary increment or others should be used to contribute for the down payment.

Make full or partial pre-payment: It is also called as loan foreclosure. Try to make all the loan EMI repayments as early as possible. Even before the standard tenure ends. It definitely saves you money. However check with the lender on the pre-payment penalty and calculate the total saving. The difference should make sense. In either case, early loan closure is always recommended as this is considered as a good credit behavior. It is a positive signal to the credit bureaus giving credit score. Money received through bonus or salary increment should be first used to pay-off the debt. If not 100% prepayment, try to make partial pre-payment.

Check out minimum income required for car loan.

Choose low interest loan: Opt for lenders offering lowest interest rate. If you are an existing customer with the lender then bargain on interest. If you are in the good books of the lender then chances of low interest are high. Instead of losing a customer because of interest rate, they would be reduce the same and retain you.

Latest – 2017 car loan interest rate on new and used car.

Research and then buy: Never fall into the trap of the car dealer claiming to offer car loan at cheapest rate. Always do your own research and check what other lenders are offering. Factors to compare are interest rate, processing fees, pre-payment charges etc. Remember it’s your money.

Opt for short tenured loan: You should try to reduce the repayment tenure to as short as possible. Longer the tenure, higher would be the interest paid and the total cost of four wheeler will further increase. Objective is that your purchase should not become costly.

Know the hidden charges: Apart from the interest rate, banks also apply processing fees, pre-payment penalty, and many others. First of all, you should be aware of all these charges. And if you are an existing customer with the bank with good credit history; then ask them to reduce or remove all these charges. Even if one of the fee is removed or fee is reduced; reasonable amount of money will be saved.

Loan transfer: Although it is not very easy, but if other bank is offering cheaper rate then you should transfer the loan. You will have to pay a penalty. But if the total saving is higher, then definitely you should opt for car loan transfer.

Read tips on choosing car loan or personal loan for car.

Opt for fixed or floating rate: There are two types of interest rate applied fixed and floating. In case of former, the interest rate is constant throughout the tenure. And in case of latter, it keeps on changing. However if the market trend estimates that loan rates may fall in the coming time, then opt for floating rate as your EMI would be low. However if you do want to take risk, then opt for fixed interest loan. Very few banks offer these two options. Otherwise fixed rate is most commonly applied.

Check your CIBIL score before applying: The most important thing to do is to get credit report from CIBIL or other credit bureaus. And verify whether the details are correct or not. Many a times; credit data reported by member banks to CIBIL are inaccurate. So if you apply for loan and banks see incorrect data, then chances of loan rejection increases. And even if banks are ready to provide loan even if the CIBIL score is poor (although the chances are low), the interest rate will be on a higher side. So if your CIBIL score is poor then first work towards it’s improvement. And then apply for loan.

Remember money is money – whether small or big. Always try to save money wherever possible.

Car Loan: Minimum Income Required by 21+ Banks/Finance Companies

You must have come across many advertisements like “Get car loan in 2 minutes”, “Own a car with a click of mouse” and many others. So exciting to read this. However in reality, getting a car loan is not that easy.

Lenders take into consideration various factors before approving loan. And the most important criteria is the income of the applicant. The only way credit lending companies such as banks, finance companies and others evaluate repayment capacity of the applicant is the income. Different lenders have varying minimum income eligibility criteria.

Listed in the below table is the income required by various lenders – public, private, and co-operative banks, financial services companies:

Name of BankMinimum Monthly Salary Required
City Union BankRs.12, 500
Jammu and Kashmir BankRs. 17, 000 - Rs. 33, 333
Abhyudaya Co-operative BankRs. 10, 000
Indian Overseas BankRs. 5, 000
Oriental Bank of CommerceRs. 20, 000
State Bank of IndiaRs. 21, 000
HDFC BankRs. 21, 000
Axis BankRs. 20, 000
Allahabad BankRs. 25, 000
Canara BankRs. 25, 000
Dena BankRs. 21, 000
Punjab National BankRs. 20, 000
Dhanlaxmi BankRs. 10, 000
Ratnakar BankRs.8, 200 - Rs. 62, 000 (Depending on the car type)
Kotak Mahindra BankRs. 15, 000
IndusInd BankRs. 21, 000
Magma FincorpRs. 12, 500
United Bank of IndiaRs. 25, 000
Tamilnad Mercantile BankRs. 10,000
Mahindra FinanceRs. 17, 000 - Rs. 21, 000
Renault FinanceRs. 25, 000
Magma FincorpRs. 12, 500

Apart from the above listed lenders there are many other lenders offering car loan as mentioned below. However their income requirement is not available. You will have to contact the bank directly for knowing this.

  1. IDBI Bank
  2. Maruti Finance
  3. Saraswat Bank
  4. Hero FinCorp
  5. Sundaram Finance
  6. Bajaj Finance
  7. Tata Capital
  8. Tata Motors Finance Limited

Other eligibility criteria for car loan are:

  • Years of employment
  • Employment/business stability
  • Age above 18 years and less than 70 years. (This varies for each lender)

If you do not have the required income then chances of denial increases. However there are few other options to get loan for buying car such as:

  1. Loan against fixed deposit
  2. Loan against LIC policy
  3. Personal loan for car

4 things to do before applying for a car loan:

  • Check credit score: Your car loan application can also get rejected because of bad credit. Many people are still not aware of credit score or they do not take it seriously. However for a financial institution; credit score is extremely important to evaluate credit worthiness of the applicant. Credit score is given by credit bureaus. They calculate this score based on the credit history of borrower. And this financial history is provided to the bureaus by the member banks. So before applying for a loan, get your credit score checked. Read more on car loan for bad credit.
  • Loan tenure: Always take shortest loan tenure. Longer the repayment period, higher would be the total cost of the car. Although you will have to shell out higher interest in case of short tenured loan. But sooner you come out of debt, better would be your credit score.
  • Bargain on interest: This is especially for existing customers of the bank. If you have a long relationship with the lender, then bargain for lower interest. Recheck whether loan offered by the dealer is saving you money or not. Dealers normally try to hard sell loan from the banks which they have tie-up with. However it is your duty to do thorough research on best interest rates available in the market.
  • Hidden charges: Every bank applies various other charges apart from the interest rate and late payment. These charges are – part and full prepayment, processing, documentation, cancellation and others. So before signing on the dotter letter, reverify and compare these charges. These charges are actually not hidden as banks do not hide them. It is actually the applicant’s mistake who do not read the fine print.

Saving money should be your ultimate goal while taking car loan. i.e. how much money you can save on car loan – either on interest rate, processing fees, etc.

2017 – New & Used Car Loan Interest Rate by 17 Banks in India

Owning a car – new or second hand gives a sense of pride to the owner of the car. However the efforts required to own a car is not easy. This is because, not everyone has required financial support to buy car. And this is when car loan is helpful.

There are many financial institutions offering car loan for new and used car. The key factor to be taken into consideration when taking any loan is the interest rate and other charges such as processing fee, pre-payment penalty, etc.

Listed in the below table is the interest rate on new car and used car by 17 banks in India:

Name of BankNew Car Loan Interest RateUsed/Second Hand Car Loan Interest Rate
ICICI Bank10.75% - 12.75%15.5%
State Bank of India9.25%10.45%
HDFC Bank9.33%13%
UCO Bank9%10.6%
IDBI Bank9.95%9.95%
Oriental Bank of Commerce10.45%12.7%
Canara Bank8.95%8.95%
Bank of Maharashtra9%9.5%
Indian Overseas Bank9.05%10.05-11.05%
Vijaya Bank9.45%11.65%
Dena Bank9.1%11.1%
Karnataka Bank9.9%13.5%
Karur Vysya Bank10.85%13.1%
Syndicate Bank10.98%NA
Punjab National Bank9.85%NA
Bank of Baroda9.6%NA
Axis Bank11.00% - 12.00%NA

High interest: So as you can see in the above table, the interest component is very high in case of used cars. The reason for having such a high interest rate is the risk associated with the used car. In case of default, even if bank tries to sell-off the used vehicle, its market value would have depreciated further.

Read more on car loan for low salaried individuals.

Factors to consider before selecting loan for car:

Loan amount: In case of new car loan, 100% loan amount equal to the value of the car is granted by most of the banks. But in case of used car, the amount is 70%-80% of the current value of the car.

Interest rate: Higher the rate, higher will the money you’ll end up paying. So select the loan with lowest interest.

Low credit score: If your credit score is low, then also you can get loan. Your income and relationship with the bank will come to the rescue.

However for the second hand car, there are further terms and conditions applied. And based on these factors, car loan for used vehicle is approved or rejected. The factors are:

1) Age of the car: Lenders offer finance to only those cars which are less than 5 years old. Few banks also limit the age to 3 years.
2) Make and model: If you are planning to buy second hand car whose make/model is no longer manufactured or has poor demand, then loan application will get rejected.

Other option to get loan for second hand car: There is only one option that remains for financing your car which is personal loan. And there are reasons to take personal loan for car.

Personal loan for car offers following advantages over car loan:

  • You can use the money for any purpose – car modification, repair works etc.
  • There is no down payment required
  • You can get personal loan against fixed deposit, LIC policy, securities such as shares, mutual fund.
  • You can buy used car irrespective of the age
  • Car remains on your name
  • No need to change hypothecation at RTO and insurance document.
  • When you take car loan, the owner of the car becomes your lender. And untill you pay-off everything, the vehicle remains in the custody of the lender. But even after repayment of all EMIs; two most important formalities need to be carried out i.e. hypothecation at Regional transport office (RTO) and name change in the insurance policy document.
  • You can sell the car even when your loan is active. This is not possible in case of car loan until all the repayments are fully paid.

Few cons of personal loan over car loan are:

Higher interest rate: Since it is a non-collateral loan, the risk is high for the lender. This is the reason why interest rate is high for personal loan.

Poor credit score: You may not get personal loan, if the credit score is poor. But there are higher chances of getting car loan, as the vehicle is under the control of the lender. Even if you manage to get personal loan, the interest rate would be high due to poor credit history.

Car Loan or Personal Loan for Car: 11 Points to Consider

There are two funding options available when you want financing for purchase a car – personal loan or car loan. Basically both are personal loan only.

But there are two fundamental differences between the two in technical terms as follows:

  • Car loan can be used only for purchasing car (new or second hand). Whereas personal loan can be used for any purpose and there is no restriction on spend. E.g. modifying the car, add new accessories, etc.
  • In case of auto loan, vehicle is in the custody of the lender. And till the time, repayment is fully done, it remains in their custody. But in case of personal loan, the car will remain in the borrower’s name. This is because, this type of loan is an unsecured loan. i.e. lender do not ask for any collateral.

Due to the above two fundamental differences, what should be preferred when buying a car – personal or vehicle loan? The answer to this question depends on the benefits and cons of each.

Let’s understand this in detail below:

1. Loan amount: In case of car loan, the amount of finance offered is equal to the cost of the car. However in case of personal loan, you can even get higher sum depending on the evaluation done by the bank. And this money can be used for buying any car. In fact, if you are eligible to get higher sum; you can even purchase multiple vehicles.

2. Money saving on the interest: The most important factor to be considered when taking any type of credit, is the interest rate. If this is low, then you will save good amount of money. Personal loan rates are in the range of 11%-24% and 8%-11% in case of car loan. With such a high difference between the interest rates; auto loan is a clearly a big money saving option. And if you are an honest borrower; taking a car loan should not be a problem even if car is under the control of the lender for some period. One way to save money on interest rate, in case of personal loan is to get it against securities such as fixed deposit, LIC policy, mutual funds and others.

Check out when to prefer personal loan for used car.

3. Poor credit score: If your score is poor due to past financial mistakes, then getting a personal loan will be difficult. Although there are other ways to get personal loan when score is poor. But you are more likely to get car loan, since your vehicle will be kept as collateral with the bank.

4. No credit score: There are many individuals, who have not taken any form of credit before. And even if they are earning good income, their credit score is not available at CIBIL. For such individuals, with no CIBIL score at all; taking a loan and regular repayment becomes an opportunity to start building credit score.

5. Building credit: If you get car loan when the credit score is bad; then it becomes an opportunity to rebuild the credit rating.

6. Down payment: No down payment is required in case of personal loan; whereas for car, down payment is must.

7. Used car: Personal loan can be used for purchasing second hand four wheeler. But very few lenders offer car loan for second hand car. Even if they do, the loan amount is calculated mainly on the basis of age of the car and depreciation value. So the finance offered is less than the actual value of the car. If the car is too old, then lender may not even offer auto loan. In this case, personal loan is the best solution. However careful evaluation will be required to calculate the actual amount you will end up paying on the interest. It should not be higher than the total cost of the second hand car.

8. Modifying and repairing the car: If vehicle modification is your objective after buying, then personal loan is the only option. You can use this money to modify the car as per your choice. Car loan cannot be used for repair. And car belongs to the bank, until you pay-off all the EMI. But in case of personal loan, car remains on your name.

9. Changes in RC book i.e. hypothecation removal: When auto loan is taken, the car is in the name of the lender. Even after the loan amount is fully repaid, it remains in the name of the lender until you get NOC from the bank. You have to then visit RTO and get the name financiers name replaced with yours. There is a small fee involved for removal of hypothecation. This is a very complicated process. No reasons required, when the name RTO comes up:)

Read more on car loan for low income earner.

10. Name change in insurance policy: You will have to also visit insurance company and show NOC from the bank and then get name changed in the policy document. This reads very simple but is a very painful and time consuming process. Moreover between complete loan repayment and changing name in the policy document, if any damage happens to the car, then claim process becomes very complicated.

11. Selling car during loan term: If you wish to sell the car during the tenure of the car loan, you cannot do it easily. This is because, the car is in the name of the financial institution who lent the money. You will have to first pay-off the entire loan amount, then only vehicle can be sold. This is not the case with personal loan. You can sell it anytime.

So prefer car loan when:

  1. You want to save money on interest
  2. No modification is required
  3. Personal loan is rejected
  4. Improve poor credit score
  5. Start building credit score when there is no score at all

Prefer personal loan for vehicle financing when:

  1. Higher loan amount is required
  2. You want to keep car in self-custody
  3. Modify the car
  4. Buy car accessories
  5. You do not have money to make a down payment
  6. You want to buy used car
  7. You want to avoid painful process of changing name in RC book and insurance document.

Close HDFC Car Loan in 3 Steps: Visit Bank, RTO & Insurer

The most important part in fulfilling your dream of owning your favorite car is – getting a car loan and closing the car loan as early as possible. There are multiple banks offering vehicle loan in India and HDFC bank is one of them. It offers various types of loans including car loan.

Most borrowers think that paying last EMI means you are all done. There are steps involved which are equally important before car loan account status can be said to be completely CLOSED.

The three steps for HDFC bank car loan closure are as follows. Each process is explained below in the article.

  1. Visit HDFC bank and get No Due Certificate (NDC) or No Objection Certificate (NOC) and form 35.
  2. Visit regional transport office (RTO) to remove and update the hypothecation in RC book.
  3. Get hypothecation removed from the insurance company record.

Step-1 – Visit bank:

HDFC car loan can only be closed by personally visiting the bank. You cannot close it online or over phone. But before going to the bank for closing the car loan; you need to ask for the loan account balance statement. If there is any balance remaining, you will have to pay the due amount. If you opt for foreclosure, then you will have that amount along with prepayment charge, if any, and then close the account.

You need to carry loan approval letter while visiting the bank. Once the bank verifies the loan account, they will grant approval for a closure. Post approval, they will issue you loan closure/termination letter i.e. NOC or NDC along with the RC copy and Form 35. This form is basically a notice of termination of the hypothecation agreement between the borrower and HDFC bank.

Check out car loan for low income earners.

NDC or NOC: It is the only legal proof that states borrower is free from obligation. Once loan is closed or terminated, it is actually the HDFC bank’s responsibility to provide NDC or NOC to the borrower. Non-availability of this most important document can hinder in following ways:

  • In case of any loan related dispute with HDFC bank, you won’t have any proof showing loan has been completely closed.
  • For any claim to be made to the insurance company, this document is required.
  • If your CIBIL record states that loan is still active, then NDC or NOC will come to your rescue.
  • You cannot sell the car against which loan was taken in the absence of this document.

Step-2: Visit RTO

Once all the formalities are done with the HDFC bank, you will have to visit regional transport office (RTO) where the said vehicle is registered and carry following documents:

  • NOC and/or closure letter issued by the bank.
  • Form 35
  • Photocopy of RC
  • Photograph
  • Receipt showing charges for hypothecation removal
  • Photocopy of vehicle insurance

When you take car loan from HDFC bank, the legal owner of the car owner becomes HDFC bank. But after closing the loan, you will have to remove bank’s name and update your name on the car’s registration certificate (RC). And RTO is the authority to do this. Once RTO verifies all the documents provided by the bank, they will provide a new RC book with hypothecation changed to the new vehicle owner i.e. YOU in this case. Once name is changed, the car finally becomes legally yours. Other option to get hypothecation updation is through agents. But this might incur additional costs but will save your time.

Read more on how to get car loan if you are a CIBIL defaulter.

Step-3: Removal of hypothecation from the insurer:

Finally you will have to get hypothecation removed from the record of insurance company. For removal; car owner i.e. you in this case; will have to provide following documents for verification:

  • NOC or NDC
  • Form 35
  • RC copy bearing your name

Congratulations – the car is completely yours now. Now after a month, check CIBIL records and verify whether bank has updated the records of loan account as closed. If not, immediately ask bank to do so. Pending status in CIBIL record will create problem in getting any type of credit in the future.

Loan for Used Car: Eligibility, Documents, Benefits, Charges

Not everyone is financially strong enough to buy a new car which in India costs not less than Rs. 5 Lac but still everyone wants to own atleast one car. This is the reason why market for second hand car performs well in India as there are many buyers looking for it. And for low income earners buying a second hand car is always a good option considering the cost factor and also the fact that new models are being launched at a fast pace and people are ready to sell-off their car and buy a new one. So more options to choose from.

There are two options for poor income earning individuals for arranging money for buying the car – they have to either shell out money from their pocket or take a car loan. Here we’ll discuss about taking a car loan.

Benefits of second hand car:

Everything has its pros and cons and second hand car too has its own benefits as follows:

  • Cost saving: Naturally a used car will cost less compared to a brand new car and so would be the monthly instalments. Moreover insurance premiums too are low in comparison to the new car.
  • Depreciation value: As per Indian motor vehicle act the value of new car reduces by 15%.


Most important factor considered by the car finance companies is the annual income of the loan applicant. Depending on the income, the loan amount varies. However there are many banks which offer car loan to the low income earners. Check out this in detail.

Documents required:

The most important documents required when applying car loan for used car are as follows:

  • Registration certificate: This book is must when applying for a loan.
  • Insurance related documents of the used car.
  • ID and address proof
  • Income proof (salary slip), bank statement, IT return form-16.
  • In addition to this, if car loan applicant is self employed then additional documents such as office ownership, business existence, income proof and other financial related documents such as P/L account, audited report by CA and others. Read about car loan for self employed.

What to look for in a loan?

You’ve finalized on which car to buy. Now it’s the time for getting a best loan. Here are the things you need to look for when choosing a loan:

  • Interest rate and processing fee: Research with every bank and select the one which offers lowest interest rate and minimum processing fee. Even a small percentage increase in these two fees would increase your overall cost. Also while buying through dealers make sure you cross-check the rates with other banks because dealers have tie-up with banks offering loan. So always compare the rates quoted by the dealers with the non-partnering banks.
  • Pre-payment penalty: Ideally every bank will charge a small fee if the applicant pays the loan before the actual tenure is over. So check with the bank on this.

Who offers car loan for second hand car in India:

Almost every bank in India offers loan for second hand car. Here are the few of the banks offering loans: Axis Bank, SBI, HDFC Bank, ICICI Bank, Canara, Andhra bank and others.

Why car loan for second hand car can get rejected:

  • Car age is also taken into consideration by the banks and typically chances of application rejection increases if the car is too old.
  • If the model of the car is no longer sold in the market then also your application can get rejected.

Car Loan for Self Employed: Income, Eligibility, Documents

Being self employed is a wonderful thing, as you are your own boss. However everything in life comes with challenges and entrepreneurship too has its own challenges. Self employed individual has to generate funds on his own for running the company be it small or big, give salary to the employees, other operating expenses and so on. Moreover to generate this money they have to rely on loans. But getting any type of loan is also a challenge because the most important factor taken into consideration by financial institution is the annual income. If the company is big then getting any type of loan (car/personal etc.) or credit is easy however not every company is big. Small business can get various types of loan such as personal, car etc.

So what about car loan for self employed with low income? Do banks offer loans to such individuals? Answer is YES. Car financing for self employed is given by most of the banks and listed in the below table is the minimum annual requirement by the banks:

Name of BankMinimum Annual Income Required
Indian Overseas Bank96,000
Ratnakar Bank1,00,000
Andhra Bank1,00,000
Kotak Mahindra Bank1,00,000
Tamilnad Mercantile Bank1,20,000
Corporation Bank1,20,000
Dhanlaxmi Bank1,20,000
Laxmi Vilas Bank1,20,000
Axis Bank1,80,000 for selected models and 2,00,000 for others
IDBI Bank1,80,000
HDFC Bank60,000 for standard car and 1,80,000 for premium/mid-sized car
Syndicate Bank2,00,000
Federal Bank90,000 (after meeting all the EMI)
Indian Bank2,40,000
Punjab National Bank2,40,000
UCO Bank5,00,000 (metro centres), 4,00,000 (other centres)
ICICI Bank2,00,000
Canara Bank3,00,000
Jammu and Kashmir Bank4,00,000
Allahabad Bank3,00,000
United Bank of India3,60,000

Documents required for self employed:

Apart from the car loan application form, self employed individual has to provide following documents while applying for a car loan. Not all the documents are required by every bank but still it’s good to keep it handy in case banks require them at later stage for further verification. And moreover these documents would be required by the businesses for any credit applications.

  • ID and residential address proof
  • Office ownership and address proof: In order to verify the authenticity of the applicant whether he’s the real owner of the said business or not, office ownership proof is required by the banks. Documents include property, maintenance and electricity bills.
  • Business existence proof: Again this is an important document to evaluate the sustainability of the business. Documents include 3 years old SARAL copy, shop establishment act, tax registration and company registration license. Banks normally require that applicant should have been running the business for minimum 2 years.
  • Income proof: Although every document is crucial but this one is most important. And self employed individual will have to produce income tax returns of minimum 2 years.
  • Other finance related documents: This includes profit and loss account, balance sheet, audit report from the chartered accountant, bank statement of both savings as well as current account showing all the transactions.

CIBIL score and car loan:

The most important factor which every bank looks is the car loan applicant’s CIBIL score in order to the judge the repayment capacity of the individual. Based on this single factor, any loan or credit card application can get denied.

For a car loan, financial institution consider a CIBIL score of 750 and above ideal i.e. chances of loan denial are reduced atleast due to the CIBIL score. Check out details on banks which offer car loan to low salary individual’s.

About CIBIL score:

Credit Information Bureau of India Limited is an organization which maintains database of all the borrowers i.e. loan or credit card customers of financial institutions. These instituitions provide details of their customers to CIBIL which contains mainly the borrowing details such as loan amount, repayment history along with other details. Financial institutions then verify these details whenever any loan or credit card application is made. The reason for scrutinization is to evaluate the repayment capacity of the applicant in order to cut-off the defaulters which are loss making for the banks.

Looking for car loan for used car? Read this.

Car Loan for Low Income Earners (Rs. 8000-Rs.30,000), Eligibility & More

Owning a car is a dream for everyone. Average cost of car in India is between Rs. 5-6 Lac which is a very big figure especially for a low income earner. Moreover getting a loan is also difficult as every bank has minimum income requirement. And on the other hand for a high income earning person/family, getting a loan is very easy. So how can a salaried person with low annual get a car loan, which banks offer loans to such individual’s?

Listed below is the minimum annual income required by the top banks in India:

Name of BankMinimum Annual Income Required
Indian Overseas Bank96,000
Ratnakar Bank1,00,000
Andhra Bank1,00,000
Kotak Mahindra Bank1,00,000
Union Bank of India4 times of net income
Tamilnad Mercantile Bank1,20,000
Corporation Bank1,20,000
Dhanlaxmi Bank1,20,000
Laxmi Vilas Bank1,20,000
Axis Bank1,80,000
IDBI Bank1,80,000
HDFC Bank1,80,000
Syndicate Bank2,00,000
Federal Bank2,40,000 (1,80,000 for loan upto Rs. 2 Lac)
Indian Bank2,40,000
Punjab National Bank2,40,000
UCO Bank2,40,000
ICICI Bank2,50,000
Canara Bank3,00,000
Jammu and Kashmir Bank3,00,000
Allahabad Bank3,00,000
United Bank of India3,60,000

So as you can see above even a low income can get you car loan provided you meet the other eligibility criteria and provide all the documents as  mentioned below. Remember that failure to meet these prerequisites can result in car loan denial.

Other eligibility criteria for car loan

  • Many banks also offers loan only to people having salary with the same bank. So check with the bank while applying.
  • Age limit: Every bank has minimum age limit that needs to be met and ideally car loans are offered to an individual with age greater than 21 years. These criteria varies for each bank however it remains the same for almost all the banks
  • Apart from this, applicant’s CIBIL score is also checked. CIBIL is an organization which maintains databases of all the borrowers of credit card and loans and their payment history. This data is provided by the banks to the CIBIL. This score is between 300 to 900 and ideally for a car loan a score of 750 and upwards is considered good. Checking of this score helps loan providers in evaluating whether a person is credit worthy or not. Doing this benefits banks to reduce their losses. Check out if you are self employed and seeking car loan.

Car loan – documents required

Listed below are the commonly required documents for car loan irrespective of whether you are earning high or low salary.

  • ID and address proof
  • Completely filled car loan application form
  • Income proof (last 3-6 months salary slip) or form 16
  • Bank statement showing salary credited
  • Few banks might also ask for current company’s appointment letter and experience certificate of previous company. This is required to check whether applicant has good job stability.
  • Education qualification degree

Since car loan is a secured loan it can be availed for new and used cars. Also make sure to read all the charges involved while taking the loan especially the interest rate, processing, late payment and prepayment charges. Other way low salaried individual’s can save money is buying second hand car and taking loan for it.