Often several potential car owners are discouraged from the idea of buying car because of worries that they might not be approved for a loan with a relatively low income. It is not impossible to get a loan to buy a car with a low income but some lenders might be willing to give you a loan if you prepare your loan application with some care.

Here are some things to keep in mind if you want to buy a car while having a low income:

1. First, it is common sense to judge if you really need a car and if you can afford it on your income. Remember, it is not just the price of the car, you will also need to factor in other substantial costs like insurance, registration and ongoing fuel and maintenance expenses. Look at your current income and expenditure and evaluate if you can sustain timely payment of EMIs plus all these other costs.

2. Get a copy of your credit report: When you are looking for an auto loan, having a good credit score is very important. Even if you have a relatively low income, lenders will check your past repayment history to see if you are a responsible borrower. If you have a high enough credit score, they might be persuaded to approve your loan.

3. Do the research on good quality second hand cars – if you take the time, you can find some good deals on used cars.

4. Be disciplined about saving: You could save money for a period of time in order to afford a car. However, you need to be patient and commit to spending discipline.

5. Debt-Income ratio: Make sure that you have a balance between your income and expenditure. Your expenditure, including current EMIs, should not exceed 50% of your income. If your monthly outflow is more than 50%, lenders are worried that you will not be able to fulfil your loan repayments.

6. You might need a co-signer: When you have a low income and you do not have any collateral to provide to the bank, you could ask another individual to act as a guarantor for the loan. The guarantor or co-signee is legally obliged to pay off the loan in case you default on your payments.  

7. Large down payment: If you have a low income, you might need to pay a higher amount as down payment on the car as the lenders are concerned that you might not be able to make all your repayments. This is known as low LTV – Loan to Value ratio. Start saving in advance so that you will be able to afford the down payment. It could be an advantage to have a high down payment as your interest payment on the reduced principal will be smaller and you will have a lower EMI for the duration of the loan.