How to buy a car with a lower income

Lenders are highly likely to reject a car loan application in the case the applicant falls under a low-income bracket.

As high as the chances are of the loan application being rejected, it is not impossible to get a car loan even with a lower income. There are loan providers who would approve your loan application, provided you keep the following factors in mind at the time of application:

• Ask yourself: This is definitely the first and foremost step for almost any big purchase. We tend to be impulsive at times and often end up buying things which we might not even be in dire need of. When it comes to a car purchase, ask yourself first if you really need the car or not. Will you be utilising the full potential of the car or are you just planning on getting a car because your neighbour or a friend recently got a new car and you love the way it looks? If you have the slightest of doubts, refrain, think, rethink, and then take a call.
• Expenses en route: Let us consider that your car loan will be approved easily. However, you should be aware of the upcoming expenses. Getting a car is not the end to it. Buying a car is a one-time investment which also includes your expenses in regard to lifetime taxes, registration, and so on. However, in addition to that, you will be required to make payments for annual services, tyres, spares, general maintenance, annual insurance, and a lot more. Make sure that you will be able to cover up all these costs once you get the car.
• Disciplined savings: Once you have the answer to the questions mentioned above, if you are ready for a car, you can start saving for one. Making a bigger down payment will make it easier for you to get a car loan as the overall loan quantum will be lower. You have to be very disciplined with your savings and commit to the same. Patience is the key.
• Consider used cars: If you are comfortable with the idea of getting a used car, you can check some of the best deals around you. It might take you some time to find a good deal but it will not be an expensive affair.
• Maintain a good credit history: If you maintain a good credit history, your credit score will be on the higher side. Your loan application is highly likely to be approved if you have a good credit score. In many cases, loan providers might even consider your previous loan repayment history and approve your loan application if you come out as a responsible borrower. In such cases, a lower income might also not stand as a hindrance.
• Maintaining a good debt to income ratio: Loan providers check the debt to income ratio of the applicants to figure out their eligibility for the loan. Make sure that you strike a balance between your monthly income and expenditure. Your monthly expenses should not exceed 50% of your monthly income. These expenses will include your existing EMIs as well. The lower the expenses, the better are the chances of loan approval for your car. If your monthly expenses are significantly higher, the chances are that your loan application will not be approved as lenders will be doubtful of your loan repayment capacity.
• Making a bigger down payment: A higher amount paid in terms of a down payment will be beneficial for you as it will bring down the overall loan quantum that you will have to borrow to get your car. A loan provider is likely to approve a loan of a lower quantum as opposed to a bigger loan amount for a longer tenure as the risk factor will also be higher.
• Have a co-signer: Having a co-signer increases the chances of approval of a loan. A guarantor or a co-signer will be responsible for the repayment of the loan amount in case you are not able to the same. This reduces the risk factor of the lender which leads to a better chance of loan application approval.If the pointers mentioned above are taken under consideration, you will likely be able to get your car loan approved and buy your dream car even if your income is comparatively lower.

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