What is the minimum income for a car loan?

A car loan is a secured loan; therefore, your credit score may not play as big a role as your income in determining whether you are eligible for the loan or not. There are various eligibility criteria set by the lenders, be it a bank or a non-banking financial company, that you will have to meet in order to get loan approval. Income is a major criterion as it represents your loan repayment capacity, and you are expected to meet the minimum requirement set by the lender.

Here is a list of lenders and their minimum income requirement for a car loan:

Lender	Minimum income requirement for salaried and self-employed applicants
HDFC Bank Car Loan	Rs.3 lakh per year (including spouse or co-applicant)
IndusInd Bank Car Loan	Rs.2 lakh to Rs.2.5 lakh p.a.
Kotak Mahindra Bank Car Loan	Rs.1.8 lakh p.a.
State Bank of India Car Loan	Rs.2.5 lakh to Rs.3 lakh p.a.
Axis Bank Car Loan	Rs.1.8 lakh to Rs.2.4 lakh p.a.

Common car loan income requirements

In the case of income of a borrower, every lender will have specific requirements which can be scouted by visiting their official websites or nearby branch office. Most lenders will be upfront about the car loan eligibility criteria set by them.

Here are a few commonalities of the income requirement among the car loan lenders in the country that you should look out for:

• Monthly or annual income: As a potential borrower or car loan applicant, you should have a minimum annual income requirement of Rs.1.8 lakh or a monthly income of Rs.15,000.
• Income of co-applicant or spouse: Some lenders take the co-applicant’s or spouse’s income into consideration. Therefore, if your individual income doesn’t meet the criterion, you can include the income of your co-applicant or spouse to meet the minimum requirement.
• Work experience: You should have at the least 2 years’ work experience and minimum 1 year with the same employer. In the case of self-employed individuals, at least 2 years’ experience in the same field of work or business.
• Debt-to-income ratio: You should maintain a low debt-to-income ratio of 45% which represents your monthly debt outgo to your monthly income.
• Payment-to-income ratio: Same goes for your payment-to-income ratio, wherein your loan repayment expense should be less than 20% of your monthly income so that you won’t default on loan repayment.

You can make use of the lender’s online car loan eligibility calculator tool for free to find out if you qualify for the loan or not.

Car loan income proof

Now that you know what income requirements to fulfill when applying for a car loan, let’s find out what you can provide as income proof to the lender. Any loan application requires you to furnish proof to back up your identity, address, and income claims.

• If you are a salaried employee, you can furnish the following as income proof:
  • Last 6 months’ pay slip or salary slip
  • Latest Form 16 and Income Tax Returns (ITR)
  • Employment certificate
  • Last 6 months’ bank statements
• If you are a self-employed applicant, you can provide the following as proof of income:
  • Business certificate
  • Last 6 months’ bank statements
  • Audited balance sheet
  • Company’s last 2 years’ Profit & Loss report or statement
  • Company’s last 2 years’ Income Tax Returns

As you may already know, your Aadhaar card, PAN card, passport, voter’s ID, driving license, utility bills (telephone bill or electricity bill), etc. can be used as proof of address and identity. This is not an exhaustive list hence it is advisable to contact the lender to find out what other documents are required for your car loan application.

* Salaried employees include applicants working with private limited companies, public sector undertakings, central and state governments, etc.

*Self-employed individuals include those who own a private company or are directors of public limited companies in trading, service, or manufacturing business.

How to ensure car loan approval

Here are some valuable tips that you can follow to ensure your car loan application is approved:

• Check your credit score: If it is less than 750, work on improving it by paying your credit card bills on time, making loan repayments without any delay, and maintaining a balance between secured and unsecured loans.
• Use car loan eligibility calculator: Before blindly applying for a car loan, find out whether you qualify for the loan by using the free online car loan eligibility calculator that is available on the lender’s website.
• Meet the income requirement: Lenders don’t take the risk of approving car loan for an applicant who is incapable of repaying the loan amount. Your annual or monthly income must meet the minimum requirement set by the lender.
• Maintain a low debt-to-income ratio: Your monthly debt payment should be less than 45% of your monthly income. This ratio will ensure that you don’t default on your car loan repayment.
• Compare car loan offers: There are several car loan deals available to you but you should choose one that is within your repayment capability. In order to narrow down on a suitable car loan offer, visit a third-party website to compare the loan deals across various lenders.
• Choose a vehicle within your budget: It is true that a car loan will help you drive home your favourite car but if you fail to repay the loan, the car will be repossessed by the lender on the grounds of loan foreclosure. Therefore, choose a car that is within your budget.
• Make a down payment on your car: Lenders look favourably upon borrowers who make a significant down payment on the chosen car. Make a minimum down payment of 20% of the total value of the car.
• Use car loan EMI calculator: This tool will help you find out the monthly and overall cost of your car loan. The results will tell you whether your chosen car loan amount can be comfortably repaid each month. Using the car loan EMI calculation, you can also create a monthly budget and stick to it.
• Pre-approved car loans: Certain lenders offer pre-approved or instant car loans to those employees who work for reputable companies and have a salary account with the lender/bank, which establishes a pre-existing banking relationship.

In conclusion, being adequately prepared before applying for a car loan will ensure car loan approval. Finding out whether you are meeting the minimum income requirement for a car loan is part of this preparation.