Zero payment car loans

A car loan where the borrower is not required to make any down payment is known as a zero down payment car loan. In such loans, the banks or NBFCs agree to fund the entire value of the car, and hence, these loans are sometimes also known as ‘100% Finance’. 

Zero down payment car loan is ideal for those individuals who wish to buy a car through a car loan but does not have enough funds to make the down payment. Before we tell you every aspect of zero down payment car loans, let us first understand how down payments affect car loans.

Features of zero down payment car loans

  • As we mentioned earlier, borrowers do not need to pay any down payment as the financial institution will fund the entire cost of your car. However, it is important to note that if you want any other car accessories, they will not be covered by 100% car financing.
  • You must have a good credit history.
  • The borrowers will have to pay the required process fee to the bank while availing of the zero down payment car loans.

Eligibility criteria for zero down payment car loans

  • Age: The minimum age of the borrowers should be 25 years or above.
  • Income: The applicant must have a minimum annual income of Rs. 3 lakhs. The car loan amount should not be more than the net annual income of the applicant. Existing loan EMIs plus the present loan EMI must be less than 50% of the applicant's salary.
  • Credit Score: A good credit score goes a long way in ensuring a successful loan application. The higher your credit score, the better your chances of getting them approved. Typically, a CIBIL score of 800 or above with no adverse loan repayment history in the credit report is helpful.
  • Nature of employment: The borrower must be a salaried individual or a self-employed professional with a minimum work experience of 3 years.
  • Residential stability: The borrower should be residing at the provided address for a minimum of 2 years.
  • The value of your car: The higher the value of the car, the lower the chances of you getting 100% finance.
  • Existing relationship with your bank: If you are an existing customer with a good track record, you stand a better chance of getting a zero down payment loan.

Documents required

The documents that the borrowers need to furnish may vary from bank to bank. However, these are the standard set of documentation required in most of the cases:

  • For income proof, the salaried individuals can submit 2 years’ Form 16, last 3 months payslips, and last 6 months' salary account bank statement. The self-employed professionals can submit their last 2 years' ITR, last 6 months current account statement, Sales Tax certificate, Service Tax certificate, and VAT certificate.
  • For address proof, applicants will have to submit homeownership deed.
  • For identity and age proof, the applicant can submit their PAN card, Passport, Aadhaar card, and recent passport-sized photographs.
  • Previous loan or vehicle ownership documents like RC of old car and loan agreement are also required.

How do down payments affect the total cost of your car loan?

Paying a substantial amount as a down payment will help you to reduce the loan amount that you need to avail of. This will further lower the interest rates and the payable EMIs. A large down payment will increase your chances of securing a loan and allow you to repay it in a shorter time.