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A successful car loan application means that you have provided all the necessary information and documents to the lender which will ultimately translate into the approval of your loan. Though it may sound easy, sometimes, your loan application for a car loan may get rejected if you are unaware of certain facts. Here, we have provided some tips on how you can boost your chances of car loan approval.
Check the eligibility set by the lender
As a rule of hand, you should check the eligibility criteria set by the lender to ensure a successful car loan approval. It can be done by using the car loan eligibility calculator tool. It will help you to find out which car loan offers you are eligible for. After that, apply for a loan that matches perfectly with your requirements and make your application process a simplified one.
Ensure that you have a good credit score
Lenders always check your credit score before giving loan approval. If you are filing a loan application without knowing your credit score, you may get rejected. If your credit score is above 700, lenders consider that you are managing your finances well and this helps them to approve your loan easily.
Access your affordability to repay
Before applying for a car loan, you must assess if you can afford to repay your loan easily or not. You can also use the EMI Calculator tool available on digital lending portals to calculate your monthly EMIs. It gives holistic information like the principal and interest component of each EMI, date of payment, etc. Doing so will help you plan your monthly budget in a better way.
Arrange down payment and documents
Generally, banks expect you to pay up to 20 percent of the value of the car, and the remaining is paid by them as your down payment. So, you must make sure that you have enough funds to pay for your loan easily before applying. However, many lenders provide up to 100% financing, but still, the borrowers should fund some part of the cost themselves. The higher you fund in the beginning, the lesser you would need to borrow and repay along with the interest, which generally goes as high as 16% per annum.
Another important factor to step up your car loan application is the documents. To check that, you can refer to the bank’s website and keep them ready. Doing this lowers your chances chance of a car application being rejected.
Income and work history
Just like your credit score is important while evaluating a car loan application, other factors such as net monthly income and work history also influence your loan approval. Based on these factors, your lender will reveal the loan terms that they are willing to offer. If you are a salaried individual, your employment stability should not be less than 2 years for a car loan. For self-employed individuals, they must have a turnover of not less than Rs. 3 lakhs per annum to be eligible for a car loan. Make sure you have stable employment and a decent income to boost your chances of car loan approval.
Apply along with a co-applicant
Applying for a car loan along with a co-applicant can assist you in meeting the standards of car loan approval. Including a co-applicant in your loan signifies that the income of the co-applicant is merged with your income. This improves your creditworthiness as well as assists you in availing of better terms and a low rate of interest on your loan.
Make existing loan repayment
While approving your loan applications, the lenders will check whether you have any previous debts or not. They try to figure out if you are paying your credit card bills and prevalent loans on time. Missing or skipping these payments can hurt your credit score. Hence, it is recommended to repay your existing debts on time. Having a satisfactory repayment history ameliorates your possibility of getting your car loan approved.
Avoid sending multiple loan applications
Usually, people believe that applying for a car loan with multiple banks will increase their chances of approval. But the reality is far different. Financial institutions and NBFCs never prefer such an applicant who files multiple loan applications with different lenders at one go. If you are in the habit of doing so, it can have severe consequences on your credit score that will affect your future credit approval chances.
While applying for a car loan, make sure to perform thorough research on your credit score, employment status, repayment capacity, payment history, etc. Imbibing a fine knowledge regarding the details of car loan approval standards increases your chances of availing of a car loan with enhanced eligibility and fast approval.
So, try to 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 your dream vehicle without facing any financial constraints.