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Planning to buy a car?

Is yes, then this article will help you to understand the different 2 main types of car loans available in the market, the eligibility criteria and documentation required to avail the loan.

Types of Car Loans

Car loans can be mainly classified into 2 types: 1) New Car Loan and 2) Pre-Owned Car Loan.

New Car Loan – All eligible customers can avail for a new car loan when purchasing his set of new wheels. The car loans could range from a minimum of Rs.100,000 to max 80% value of the car or even 100% depending on the bank or finance company.

One can find out if you are eligible for a New Car Loan and the maximum limit using the Car Loan Emi Calculator which most banks and finance companies offer on their company website.

The eligibility for a New Car Loan/ Pre-owned Car Loan depends on the type individual if he or she is a Salaried, Self-employed, Salary customers etc.

Below are the details for each individual type.

Salaried individuals who are eligible for a New Car Loan/ Pre-owned Car Loan

  • Minimum 21 years of age
  • Maximum 70 years of age at maturity (conditions apply)
  • Minimum Net Annual Salary of Rs. 2,40,000 p.a. for all approved car models
  • Income eligibility based on latest salary slip and Form 16
  • Minimum of 1-year continuous employment

Self-employed individuals who are eligible for a New Car Loan/ Pre-owned Car Loan

  • Minimum 18 years of age
  • Maximum 75 years of age at loan maturity
  • Minimum Net Annual Business income of Rs. 1,80,000 p.a. for selected models and Rs. 2,00,000 p.a. for others
  • Income eligibility based on latest Income Tax Returns
  • Minimum 3 years of employment in the same line of business

Self-employed non-individuals who are eligible for a New Car Loan/ Pre-owned Car Loan

  • Minimum Net Annual Business income or Rs. 1,80,000 p.a. for selected models and Rs. 2,00,000 p.a. for others
  • Income eligibility based on latest 2 years Income Tax Returns and audited financials of 2 years along with computation of income
  • Minimum 3 years of employment in the same line of business

Priority / Wealth customers eligible for a New Car Loan

  • Customers with a vintage of 6 months
  • A minimum Average Quarterly Balance (AQB) as below:
  • An AQB of Rs. 1 Lakh for last 2 completed quarters. AQB requirement to be met for both the quarters
  • Maximum loan amount restricted to 3 times the AQB in the last 2 quarters

Salary customers eligible for a New Car Loan

  • Customers who have a Salary A/c with Axis Bank since the past 3 months
  • Those who work with the following organisations:
    • Public Limited and Private Limited Companies
    • MNCs
    • Permanent employees of State / Central Government
    • Permanent employees of Public Sector Undertakings
    • Permanent employees of reputed schools / colleges
  • Other factors
    • Minimum 21 years of age
    • Maximum 70 years of age at loan maturity
    • Minimum Net Annual Salary of Rs. 2,40,000 p.a.
    • Income eligibility base on latest salary slip and Form 16
    • Minimum 1 year of continuous employment

The documents required for availing the car loan

  • Age proof
  • ID proof
  • Application form
  • Photograph
  • Residence proof
  • Income proof
  • Bank statement
  • Signature verification proof
  • Pro-forma Invoice or Rate List (for new car loan only)

Additional documents required in case of Pre-Owned car loan

  • Car Valuation report
  • RC copy in case of refinance
  • Post-sanction, Pre-disbursement Documentation:
  • Loan Agreement duly signed along with RTO set
  • Standing Instructions (SI) Request / ECS Form/Post Date Cheques (PDCs) – Security Cheques are required for SI and ECS

Tips & Tricks – How to manage your car Loan

Ensure you set out a budget. Make sure your car loan EMI is not more than 15% of your monthly net income. Keep money for your daily and necessary expenditure, keeping some money aside for unforeseen emergencies.

Pay a higher down payment. Paying a higher initial amount helps to reduce debt long term and saving money by paying lower EMI’s and interest.

Choose a Shorter Tenure. Select a lower tenure may be 3-5 years as over 7 years. This may mean a higher EMI, but also lower rate of interest.

Never miss an EMI. Disciplined payment of the EMI helps to avoid any late charges and also facilitates a healthy credit score.

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