Everyone nowadays requires a vehicle. In India, getting a vehicle loan is relatively simple for self-employed and salaried persons, but getting a car loan for unemployed people is quite difficult. Proof of consistent income is the most important element in obtaining a car loan in India. After all, the bank or other lender wants to make sure you have a consistent source of income so you can repay the loan on time.
Eligibility for vehicle loan in India
In India, vehicle loan eligibility differs from one lender to the next. Banks, on average, have more stringent qualifying requirements than NBFCs and other digital lenders. The following are the most important factors for vehicle loans in India:
- The applicant must be between the ages of 21 and 65.
- A consistent income is required.
- Have a high credit rating
- Maintain a steady job
Unemployed people in India can acquire vehicle finance from banks, non-banking financial companies (NBFCs), and auto dealerships to buy a new or used car of their choice. Here are various methods for an unemployed person to obtain a car loan:
Show an alternative source of income
If you have an alternative source of income, such as a pension, disability income, interest from a Fixed Deposit (FD), or a return on investment, some lenders may approve your vehicle loan application.
Opt for a car loan against FD
It’s a popular way for unemployed people to get a vehicle loan. You can use your Fixed Deposit (FD) as collateral to get a loan if you have one with the bank. The lender interprets this as an OD (Overdraft) on your FD and approves the loan. If you have a joint FD, you must obtain the co-written holder’s approval before applying for a loan.
Get a co-signer
Lenders may approve your auto loan application if you have a cosigner with a solid credit score and a stable income who can serve as security/guarantee. The co-applicant is held liable if you are unable to make your loan installments on time. So, before you get the co-applicant on board, make sure you explain the scenario to them fully.
Offer large down payment
A hefty down payment on a car of your choice can improve your chances of getting a car loan. A hefty down payment might help lower your car loan’s overall cost. Even if you don’t have a stable income, the lender may be more willing to approve your car loan if you can come up with a big down payment.
Opt for a loan against car
You can apply for a loan against your car if you currently own one. In this situation, you use your old car as collateral to get your car loan. Loans against vehicles typically have a term of one to three years, with vehicle loan rates ranging from 14% to 20% per year. You can borrow up to 150 percent of the market value of your present car (the one you’re using as collateral) when you apply for a loan against it.
Take a car loan against a property
Another approach to secure auto financing is to guarantee your property or gold in exchange for a car loan that you may use to buy a new or used car of your choice. However, keep in mind that if you don’t pay your loan EMIs on time, the lender may take possession of your property as payment.
It takes time and research to find a car loan when unemployed. When you don’t have any proof of employment, expect to pay a larger down payment and a higher interest rate.