Car loan for unemployed
To avail car loans in India, proof of steady income is the most decisive factor. It helps the financial institutions to know the repayment capability and decide whether to approve your loan request or not. However, for whatever reason, if you are currently unemployed, you can still get an auto loan from the banks and NBFCs of your choice if you meet the required eligibility. Read on to know the ways on how you can avail an auto financing if you do not have a steady source of income.
Provide proof of an alternative source of income: Your car loan application can be easily approved by the banks if you show them an alternative source of income. It can be income from a fixed deposit, rental income, disability pension or retirement pension, etc. When you provide an alternative source of income, the lender is assured that you can repay your loan EMIs on time, which boosts your chances of loan approval.
Maintain a good credit rating: Lenders look for an applicant’s credit score and credit history to evaluate his/her creditworthiness. If you maintain a good credit score and a good credit history with no outstanding dues or bankruptcy filings, then lenders may approve your car loan application. Any score of 750 or above is considered good for getting car loans.
Here are a few tips to improve your credit score:
- Make your loan EMI payments and credit card bill payments on time.
- Reduce your debt-to-income ratio.
- Maintain the right balance between secured loans (home loans) and unsecured loans (personal loans).
- Avoid making minimum payments on your credit card balance, always try to pay in full.
- Show proof of stable residency: When applying for car loans, you might be required to submit several KYC documents such as identity proof, age proof, address proof, and income proof. If unemployed applicants could show residential stability wherein, they have stayed in the same residence for more than 1 year then the lender is more likely to approve your loan request.
- Make a large down payment: Paying a sizeable down payment for the car increases your chances of getting a car loan, even when you are unemployed. A substantial down payment will also reduce the overall cost of your car loan. A reduction in loan amount minimizes the risk of the lender, thereby enabling them to approve your car loan request.
- Take a Car Loan against FD: It is one of the popular options that unemployed individuals use to secure a car loan. If you have a Fixed Deposit (FD) with the bank, you can submit your FD which will serve as collateral for your car loan. In case if you have a joint Fixed Deposit account, you must get the written consent of the other account holder before filing a car loan application.
- Take a loan along with a co-applicant: You can get a loan along with a co-applicant who must have a good credit score and a steady income. In this case, the co-applicant acts as a security/guarantee for your car loan, who will be held responsible for making the payments when you are unable to pay on time. Make sure to evaluate the credit profile of your co-applicant before signing a loan deal with them.
- Get an auto loan against property: Another way by which you can get auto financing is by pledging your property or gold to obtain a car loan which can be used to purchase a new or used car of your choice.