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How A Self-Employed Can Apply For A Car Loan

5 minsFebruary 16, 2018

Buying a car is a life milestone. And going on a long-drive is what each one of us fantasizes –––be it a self-employed, or a salaried individual.

How A Self-employed Can Apply For A Car Loan

With a car loan, you could be driving the dream car of choice. Axis Bank’s car loan is a viable choice for self-employed individuals such as practicing doctors, lawyers, Chartered Accountants, management consultants, businessman, who are exposed to variable income.

The process is fairly simple, and you get a flexible loan tenure ranging from 12 months to 84 months. 

What are the eligibility criteria for a self-employed?

  • You need to be minimum 18 years of age
  • The maximum age should not exceed 75
  • Your net annual business income should be at least Rs 1.80 lakh per annum for select model and Rs 2.00 lakh per annum for others
  • You ought to be employed in the same line of business/profession for 2 years

For self-employed non-individuals, i.e. those seeking a car loan under their organisations name (for depreciation benefit and to claim interest on car loan as deductible expense under the Income Tax Act) the criteria, too, is the same.

What are the documents needed?

Along with the car loan application form, the following documents will be scrutinised before deciding on the loan amount to be disbursed:

  • Income statements (of the last two years validated by your CA)
  • Bank statements
  • Latest Income-Tax Returns
  • Pro-forma Invoice or Rate List
  • Duly signed loan agreement
  • Credit report
  • Age proof
  • Address proof
  • Photo identification proof
  • Photographs

Besides, the type of vehicle you wish to buy, the loan tenure (3 years, 5 years, or 7 years), employment stability, and pre-existing EMIs (or Equated Monthly Instalments) on outstanding loans will be looked at closely before approving a loan at a certain EMI.

Your credit worthiness will be assessed as part of the entire due diligence process. If your credit score is high (750 and above), bargaining for a good deal is possible, whereby the interest rate stands reduced to the best possible percentage points (reducing your EMI).

Further, if you are already a Priority Banking, Wealth Banking, Privee Banking customer of Axis Bank, it will entitle you to special benefits, viz. lower processing fee, waiver of income documents, and bank statements, and much more!

In case you wish to get a broad sense regarding your eligibility, check the car loan eligibility criteria. And to know how much the EMI would be on the car loan, the EMI calculator can be the resource.

How much is interest on car loan?

The interest rate you would pay depends on a variety of factors: type of vehicle you wish to buy on loan, risk profile, tenure of the loan, whether you are Priority Banking, Wealth Banking, Privee Banking customer,your credit worthiness  among many other things.

But to give a broad sense, at Axis Bank, new car loan interest rates start at 8.75%. For further details visit our Car Loans section on our Homepage. 

How much is the processing fee and other charges?

The processing fee is the one-time fee charged as a certain per cent of the loan, but capped at an ‘x’ amount. It has a bearing on your total cash outflow while availing a loan. At Axis Bank, the processing fee is in the range of Rs 3,500 to Rs 5,500 as processing fee, inclusive of GST.

As regards the other charges, they include: prepayment charges (also known as foreclosure charges), part-payment charges, late payment penal interest, loan cancellation charges / re-booking charges, cheque bounce charges, and so on, all of which you should examine carefully.

How much is the tenure for a car loan?

As mentioned earlier, the loan tenure is flexible –– ranging between 12 months to 84 months. A higher tenure can reduce your EMIs, making repayments comfortable, while opting for a lower tenure (of say 3 year or 5 years) increases your EMI.

Is there a security or collateral needed to obtain a car loan?

Yes, your car will be as collateral and will be hypothecated. Hence, you cannot sell the car until the loan is repaid in full and the bank has issued the No Objection Certificate (NOC).

In the interest of your credit worthiness, make sure you timely repay. This will even keep your financial health in pink. You may also opt to prepay the loan as most lenders, including Axis Bank, provide this facility.

What are the different options to pay EMIs on car loan?

You can opt for either of these:

  • Standing Instructions (can be used if you have a current account with Axis Bank)
  • Electronic Clearing Service (if you do not have an account with Axis Bank and would like your EMIs to be debited automatically at the end of the monthly cycle)
  • Post-Dated Cheques (submission of post-dated EMI cheques from a non-Axis Bank account at your nearest Axis Bank Loan Centre)

How to remove hypothecation once the car loan is repaid in full?

To remove the hypothecation from the Registration Certificate (RC), the bank will provide you the following documents:

  • No Objection Certificate (NOC)
  • FORM 35 (Notice of termination of an agreement of hire-purchase/lease/hypothecation)

The documents need to be forwarded to the Regional Transport Office (RTO) and the general insurance company (for car insurance) to take cognisance and remove the hypothecation.

What are the benefits of availing a car loan?

Sometimes, paying upfront in cash could put you under the Income-tax department’s radar, more so after demonetisation. To avoid that, paying the down payment and availing a car loan, is more sensible.

Moreover, here are other benefits of availing a car loan:

  • Depreciation benefit, plus interest can be claimed as deductible expenses for loan taken under the name of your organisation
  • Your existing finances are not exhausted
  • You don’t have to touch your existing investments assigned for other important financial goals
  • You don’t have to mortgage your existing assets; because a car loan is a secured loan
  • You have the opportunity to own the car and drive it happily as you service the loan

To conclude…

Fulfil your financial and emotional goal of owing a car with a car loan. You also have a chance to earn Axis eEDGE Reward points and these can be redeemed against some exciting offers.

But to make an informed choice, make sure you read the terms & condition carefully. This will avoid issues later and ensure a pleasant, hassle-free experience. After all, you want to buy your dream car with a smile on your face, don’t you?

The customer service at Axis Bank, among few others, for instance, is transparent and well-co-ordinated.

Drive in your dream car today!

We could add the phone banking number incase any customer wants to know more about Auto Loan.

Happy Banking!

Disclaimer: This article has been authored by PersonalFN, a Mumbai based Financial Planning and Mutual Fund research firm known for offering unbiased and honest opinion on investing. Axis bank doesn't influence any views of the author in any way. Axis Bank & PersonalFN shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.