Minimum Credit Score
700
Income Requirement
₹25,000/month
Maximum Loan Tenure
Up to 5 years
HDFC Loan Eligibility
Introduction:
Understanding your eligibility is the first step in getting a car loan. By checking your eligibility, you can determine the loan amount you qualify for, the terms, and the interest rates that will be offered. Car loan eligibility criteria differ from lender to lender and can be based on various factors, including your income, age, employment, and credit score.
Types of Car Loan Eligibility Criteria
Banks and financial institutions use different methods to assess your eligibility for a car loan. The two most commonly used methods are:
- FOIR-Based Eligibility
- Multiplier-Based Eligibility
1. FOIR Based Eligibility
FOIR, or Fixed Obligation to Income Ratio, is a measure used by banks to assess how much of your monthly income goes toward paying off existing debts. This ratio helps the bank understand whether you have sufficient income left to manage the new car loan EMI without overburdening your finances.
Formula for FOIR:
FOIR=Total Monthly Liabilities (EMIs)Gross Monthly Income×100\text {FOIR} = \frac {\text { Total Monthly Liabilities (EMIs)}} {\text {Gross Monthly Income}} \times 100
Example:
Let’s say your monthly income is ₹50,000, and you have EMIs of ₹15,000 for a personal loan. The calculation for your FOIR would be:
FOIR=15,00050,000×100=30%\text {FOIR } = \frac {15,000 } {50,000 } \times 100 = 30\%
This means 30% of your income goes toward your current liabilities, which is generally considered good. The ideal FOIR should be 40% or lower for loan approval. A higher FOIR indicates that you may have limited capacity to take on a new loan.
What Banks Look For:
Ideal FOIR: 40%–50% is considered safe.
Maximum FOIR: Banks may accept up to 60%, but additional documents may be required.
Impact on Loan Eligibility: A lower FOIR increases the chances of securing a higher loan amount with favorable terms.
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2. Multiplier-Based Eligibility
The Multiplier-Based Eligibility method is commonly used in India to determine the loan amount you can qualify for based on your monthly income. Banks typically offer a car loan amount by multiplying your monthly income by a fixed multiplier. This approach is simpler and directly related to your income.
How It Works:
The bank uses a multiplier to calculate your loan eligibility. The multiplier is often between 1.5x to 3x of your monthly income. The exact multiplier depends on the lender and other factors like your credit score and employment stability.
Example:
Let’s assume the bank applies a 2.5 multiplier. If your monthly income is ₹50,000, then:
Loan Eligibility=50,000×2.5=₹1,25,000\text &123;Loan Eligibility&125; = 50,000 \times 2.5 = ₹1,25,000
This means the bank will offer you a loan amount of ₹1,25,000, based on the multiplier.
Factors Affecting the Multiplier:
Income Level: 40%–50% is considered safe.A higher monthly income generally results in a higher loan eligibility.
Credit Score: A higher credit score increases your loan eligibility and may allow a higher multiplier.
Job Stability: Lenders often favor salaried individuals with stable employment.
Car Type: The type of car (new or used) can affect the loan amount, as new cars are considered lower-risk assets.
Eligibility Criteria for Car Loans
Eligibility criteria can vary depending on the bank or financial institution, but some common factors include:
| Eligibility Criteria | What Banks Look For | Impact on Loan Eligibility |
|---|---|---|
| Age | Applicants aged 21 to 60 years are eligible | Applicants outside this range may face challenges in approval. |
| Income | Steady monthly income (₹15,000 – ₹25,000 for salaried) | Higher income increases loan eligibility and the loan amount. |
| Employment | Salaried or self-employed individuals | Stable job/business increases the chances of approval. |
| Credit Score | Typically, a score of 700 or higher is preferred | A higher credit score lowers interest rates and improves eligibility. |
| Existing Liabilities (FOIR) | Lower existing loan obligations | A low FOIR (below 50%) increases chances of loan approval. |
| Car Type | New cars generally have higher loan eligibility | Used car loans may have slightly lower eligibility. |
How to Improve Your Car Loan Eligibility
If your eligibility doesn’t meet the required criteria, you can take steps to improve your chances of securing a loan. Here are some tips:
Increase Your Income: If possible, increase your income through side jobs or additional work to improve your loan eligibility.
Improve Your Credit Score: Check your credit report, resolve any discrepancies, and pay off existing loans to improve your score.
Lower Your Existing Liabilities: Reduce your current debts to lower your FOIR and free up capacity for your car loan EMI.
Provide a Higher Down Payment: Offering a larger down payment reduces the loan amount and makes you a more attractive borrower.
Apply with a Co-Applicant: Adding a co-applicant with a good credit score and stable income can improve your eligibility.
MinEmi Tip
"Want to improve your chances of approval? Pay off existing loans to reduce your FOIR and increase your down payment to reduce the loan amount."
Eligibility Criteria by Lender
Eligibility Criteria
Minimum Credit Score
720
Income Requirement
₹20,000/month
Maximum Loan Tenure
Up to 7 years
AXIS Loan Eligibility
Minimum Credit Score
700
Income Requirement
₹25,000/month
Maximum Loan Tenure
up to 5 years
SBI Loan Eligibility
Minimum Credit Score
680
Income Requirement
₹25,000/month
Maximum Loan Tenure
Up to 6 years
ICICI Loan Eligibility
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