Factors Impacting Eligibility Criteria for a Used Car Loan
About a decade ago, purchasing a car was a long and tedious process involving a lot of documentation and compliance. Today, leading financial institutions offer auto loans that allow you to drive your dream vehicle home within a few days.
Lenders provide car loans for new as well as pre-owned vehicles. However, you must know if you are eligible for the same. Here are some factors that impact your used car loan eligibility:
- Credit score
This reflects your creditworthiness and provides lenders with an exact assessment of your financial status. A high credit score increases the probability of loan approval; a lower score may cause the opposite.
- Type of vehicle
Every vehicle has a certain resale value based on its technical specifications and features. As the price of the vehicle depreciates over the years, its resale value is taken into account. If you choose a model with a higher resale value, your second-hand car loan can get approved more easily.
- Income and employment status
Lenders will consider your income to determine your ability to pay monthly installments on time. In case your income falls short of the ideal benchmark, you may include the income of your spouse or other family members to increase your used car finance eligibility.
Your employment status also plays a key role here. You should have an employment history of a minimum of three years; this should include experience of at least one year in your current organization.
Most financial institutions offer car loans to applicants who are at least 21 years old. Additionally, they require you to repay the loan by the time you are 60 years or 65 years old. Lenders prefer granting loans if you have a long working tenure over your lifetime; this helps them ensure financial stability and timely repayments.
- Debt-to-income ratio
Almost every lender, including Mahindra Finance, considers the debt-to-income ratio before approving your used car loan application. If you have high outstanding liabilities, it reduces the chances of your loan being approved. Thus, you must repay as many loans as possible to improve your used car loan eligibility.
- Employer’s reputation
When you work for a reputed company with a higher ranking, your eligibility improves. In addition to receiving a higher loan amount, you may be able to benefit from a lower used car loan interest rate.
However, if you are employed by an unknown company, you will need a higher income to qualify for a greater loan amount.
- Relationship with the financial provider
If you have a good relationship with the lender, you may qualify for a loan even if you are unable to meet some of the aforementioned eligibility criteria.
Now that you know about the various criteria to secure a used car loan, you must meet them to avoid loan rejection at any stage.