Zero down payment on a car: Documents, eligibility and other required details

Sheetal has plans to buy a car and has been exploring financing options. She recently got to know about a service offered by a bank which is a zero down payment car loan. In this loan facility, the lender funds the entire value of the car. What sets it apart from other loans is that there is no down payment involved. Usually, banks charge an initial amount, which is a certain percentage of the value of the car. However, it is possible that a person desirous of purchasing a car does not have enough funds to make the down payment. In such cases, zero down payment loan is an excellent option to explore. A zero down payment loan is often referred to as a 100% finance loan.

When you avail zero down payment loan, you will be required to pay processing fees, which is a small percentage of your loan amount, to the bank.  This fee is not a fixed fee and can change subject to the state registration charges, road tax and insurance. If you wish to get any accessories for your car, those are not usually covered under a zero down pay ment car loan.

 

Who is eligible for zero down payment car loan?

The exact eligibility criteria depend on the bank you are approaching for the zero down payment loan. However, the ones set out below are the common factors that most banks will take into account before signing off on your zero down payment loan application:

-Income: The annual income drawn by you should be more than the value of the car and the loan amount taken should be less than the net yearly income.

-Credit score: A good credit score goes a long way in ensuring a successful loan application. So higher your credit score, better is your chance of getting the loan application processed. Typically, a CIBIL score of 800 or above with no adverse loan repayment history in the credit report is helpful.

-Existing debts: If you have existing debts/EMIs to pay, it may be challenging to obtain a zero down payment car loan.

-Value of the car: If the value of your car is costly, it will be challenging to obtain a zero down payment car loan.

-Approaching your bank: It is better to approach the bank where you have long-standing relationship with. It will be easier to secure the loan from them.

 

Documents required

The exact list of documents that need to be furnished may vary from bank to bank. However, these are the standard set of documentation required in most cases:

• Any of the following as a proof identity: Aadhar Card, Passport, PAN Card, Voters ID Card, Driving License (recent, legible, laminated)
• If you are a salaried individual, latest salary slip and Form 16 as income proof. If you are self-employed, then the latest tax returns as proof of income.
• Any of the following as a proof of residence: Aadhar Card, Ration Card, Driving License (recent, legible, laminated, Voters ID Card, Passport Copy, Telephone Bill, Electricity Bill, Life Insurance Policy
• Bank account statements for the last 6 six months.

 

FAQs

How can zero down payment car loan help me with the finance?

Down payments are insisted by the car seller to validate your financial credibility, which will give them some assurance. Once you pay a substantial amount as a down payment, the EMI reduces. Once you avail a zero down payment loan, you don’t have to worry about funding the initial source of payment. You will have to pay the processing fees to the bank and then repay the loan through EMIs.

Is it possible to get an instant approval for the zero down payment loan?

Many banks offer this option and you can receive an e-approval of the loan application once the necessary documents are submitted. In the meantime, the bank processes the loan application.

Is there a minimum age limit of the loan applicant?

Most banks are keen on giving a zero down payment loan to an applicant who is 25 years at least as proof of income is one of the key criteria for a successful loan application.

Is there any restriction on the value of the car that I can purchase?

The value of the car must be less than your net annual income. This is important because the bank must be satisfied with your ability to service the debt.

Can I avail multiple zero down payment loans at the same time?

This decision is to the bank's discretion, and your credit history, track record, existing debts and relationship with the bank will be important factors to be considered for availing multiple loans at the same time.