Federal Bank Car Loan Eligibility

It is important to check for your eligibility to get a car loan before applying for one. Federal Bank has laid out a few points that will help in understanding your car loan eligibility criteria. This will help in preparing documents and your financial condition to successfully receive a car loan.

Income of the Applicant

• There is a minimum income level required to apply for a car loan. An applicant should have a minimum take home amount of INR 20,000 per month after being able to fulfil all EMI commitments including the expected car loan monthly pay-out. This figure will be lower for rural and semi urban areas.
• Federal Bank allows for applicant’s spouse income to be added to overall income generated by the applicant while applying for the car loan.
• One can also add agricultural and rental income as part of the regular income earned by the applicant. This will be over and above the regular income. The total amount should be a minimum of INR 40,000 per month.

Period of Loan

• For new vehicles, the period of loan will be 60 months (other than two wheelers)
• For salaried individuals, this period will be 84 months
• If you plan to purchase a used vehicle, the loan tenure will be 60 months
• For new two-wheelers, the bank offers a loan period of 48 months

It is important to note here that the salaried category is defined by the Bank and can change from time to time.

Additional criteria for Used Vehicles

• The Federal Bank calculates depreciation on Used Vehicles by the Straight-Line Method at 15% for the first year and 10% for the subsequent years.
• If the purchase is made during the year, it will be treated as one full year.
• The vehicle should not be older than 3 years.
• The bank calculates 75% on lower of the depreciated or market value as eligibility

Federal Bank car loan eligibility criteria also include the submission requirements for different groups of people.

KYC Documents

• 2 x passport size photos of the applicant and the co-applicant if any
• Identity proof – passport, driving license, voters ID, PAN card or Aadhar
• Address proof – passport, voters ID, driving license or Aadhar
• Age proof – passport, birth certificate, driving license, SSLC or AISSE certificate
• NRI customers need to submit additional documents like certified copy of the passport, visa, work permit and ID card

If you are a Resident Salaried person, the following documents also need to be submitted:

• Latest salary certificate or salary slip of last 3 months
• Form 16 of last two years or copies of IT returns of last 2 years
• 6 months’ bank account statements which shows the most recent salary credits

If you are a Resident Self-Employed person, the following documents are required:

• Business profile or proof of business existence
• Bank account statements of last 12 months
• IT returns of last two years supported with Balance Sheet, P&L account

If you are a Non-Resident Salaried person, the following documents are required:

• NRE Account statement with any bank for the last one year
• Salary certificate which has been certified by the Embassy/CRO/3 months’ salary slip

• NRE account statement of last 2 years of the applicant and/or resident accounts of spouse/parents with any bank wherein remittance has been made

If you are a Non-Resident self-employed person, the following documents are required:

• Proof of Business existence or Business Profile
• Bank account statements of last 12 months
• Balance Sheet, P&L account for the last 2 years

• NRE account statement of last 2 years of the applicant and/or resident accounts of spouse/parents with any bank through which remittance has been made

Federal Bank requires the following additional documents to process the car loan.

• Invoice indicating the total value of the car
• Sale Letter& Valuation letter from the car dealer if it is a used car

What are the factors impacting the eligibility of a car loan?

There are many factors that affect the eligibility of a car loan applicant. These are mentioned below:

Credit score –  It is important to get your credit score assessed. Any current EMIs or liabilities should be kept minimal or paid off to increase your credit score. Banks prefer applicants with high credit score. These applicants get the car loan sanctioned easily and in less time. If you have a low credit score, it is advisable to pay off your liabilities completely before applying for a car loan. This will increase your chances of getting the loan sanctioned successfully.

Age –  Minimum age criteria to apply for a car loan is normally 21 years. To be financially prudent, one must ensure that the loan is completely paid off by the time you turn 65 ears. Banks prefer to offer car loans to customers who have higher working years left in their lives.

Income level – Even if you submit a loan application for the complete amount of the car, it is not necessary that the bank will sanction it. This depends on your income level. In case your income level does not meet the minimum criteria set by the bank, you can add your spouse’s income or any other family member to meet the threshold limit.

Debt –  This is directly linked to your credit score. If you are debt-ridden, chances are less of securing a car loan. The banks calculate your debt-to-income ratio as it is a big factor in car loan eligibility criteria. If you are currently repaying another loan, the bank can be reluctant in offering another loan.

How to improve your eligibility for car loan?

While the banks set some eligibility criteria, it need not be a deterrent for you to apply for a car loan. There are ways to improve your eligibility for a car loan.

Repay existing debts –  Any existing debts in your financial portfolio is not considered positive by the bank. Hence, it is important to pay off all your debts. Past dues should not be kept pending. This step increases your debt-to-income ratio and betters your eligibility to apply for a car loan.

Bring in Co-applicants –  Your chances of securing a car loan improves many folds over if you bring a co-applicant. The co-applicant is equally responsible for repaying the loan. Immediate family members like father, mother, spouse, brother, sister etc are all considered as co-applicants.

Increase your credit score – Increasing your credit score is a very important step in securing your eligibility for car loan. Paying off pending bills or credit card bills or debts improves your credit worthiness. It is important to revolve your debt to get a good credit score.

FAQs- Federal Bank Car Loan Eligibility

(1) What is a car loan?

A car loan helps you finance the purchase of a new car or a used car with pre-determined principal loan amount, rate of interest and loan period.

(2) What is a credit score?

A credit score is a simple calculation of your financial situation. It includes your debts and income sources. It shows the strength of your financial condition.

(3) Can I apply for a car loan with Federal Bank if I do not have income?

Federal Bank offers special schemes for people without income to apply for a car loan. However, there might be additional eligibility criteria and documentations required.

(4) How can I improve my credit score?

The simple ways of improving your credit score is to pay off dues, keep your outstanding payments at the minimum level and maintain lower revolving debt.