Since the onset of the pandemic, the way we travel has changed drastically. People prefer to travel by car instead of taking public transportation. But, if you do not own a vehicle and plan to purchase one, the high price may put a dent in your wallet. This is where you will realise the importance of using a car financing option. The best part about the vehicle loan is that in addition to the car price it also covers the cost of car insurance, and you do not have to pay extra for buying car insurance online.
Here are seven crucial tips for ensuring immediate vehicle loan approval and disbursement of funds.
1. Increase downpayment
Make sure to start saving for the down payment well before you submit your loan application form. Typically, financial institutions lend up to 80-90% of the car's market value. If you have an average credit profile, invest more towards the upfront payment. Increasing the downpayment to 40-50% of the vehicle's value means you are more invested in your loan, and you will lose more if you default. Given this scenario, easy approval is on the cards.
Also, while saving for a downpayment, consider the running costs and the cost of comprehensive car insurance premiums.
2. Review your financial position
Before you visit your lender, look over your income and debt-to-income ratio. The income assists the lender in determining your repayment capacity. On the other hand, the debt-to-income ratio tells them how much of your current earnings are going toward debt repayment.
Even a six-figure monthly income may not get you loan approval if your debt-to-income ratio is more than 50%.
3. Improve your credit history
If your credit report demonstrates poor repayment behaviour, you will have difficulty obtaining a vehicle loan. A credit report with an unsettled or default remark is a major red flag. Thus, before applying for a loan, pay off any default debts and obtain a No Objection Certificate (NOC) from your lender.
Also, if you miss EMIs on existing debt regularly, stop defaulting immediately. The more diligent you are with your loan, the better your chances of loan approval.
4. Look for a pre-approved loan
If you have been a responsible borrower in the past, your current lender is likely to offer you a pre-approved vehicle loan. This type of loan informs you of your borrowing capacity as well as the interest rate applicable to your profile. Based on this, you can make an informed decision on the vehicle that best fits your needs and set aside the required down payment.
5. Review eligibility requirements
When choosing a lender, review various lenders' qualification criteria. Look out for the minimum and maximum age criteria, income criteria, employment status, work experience etc. The vehicle loan eligibility criteria and risk profiling method differ slightly with each lender.
You may take the assistance of a vehicle loan aggregator website for this. Once you are done with the comparison, choose the one whose minimum qualification matches your income and credit profile perfectly to get instant approval.
6. Resale value
Another important factor in vehicle loan approval is the car's resale value. If you finance a car with a low resale value and default on your loan for any reason, the lender will fail to recover the majority of the unpaid dues by auctioning your car.
However, the higher resale value car significantly reduces the lender's risk of lending.
7. Additional income
Many people believe that only a primary source of income is considered when approving a vehicle loan. This is not always the case. Your loan approval chances increase if you have additional income sources such as rental income, freelancing income, and income from a part-time business. All you need to do is provide supporting documentation to get a quick vehicle loan approval.
To conclude
Obtaining an instant vehicle loan approval is easy. You simply need to convince your lender of your repayment capacity while mitigating the lender's lending risk. You can do that by increasing the down payment and selecting a vehicle with a higher resale value.
In India, car insurance is mandatory for all car owners. In case you are caught driving your car without valid car insurance online, you can be penalised by the authorities.
While mandatory car insurance protects you from third-party liabilities, comprehensive car insurance online covers damages to your car as well. However, comprehensive car insurance online comes at a higher cost compared to mandatory car insurance.
Remember, your car loan covers the cost of third-party car insurance. For wider coverage—comprehensive or own-damage car insurance online—you must pay an additional amount out of your pocket.
