Can an unemployed individual get a used-car loan in India?

car loan application: Here's what you need to know before applying for a car  loan - The Economic Times


There is no end to dreams. Many of the young entrepreneurs or salaried persons after 3-4 years of their earning life prefer to buy a car. Owning a car is still visualized as a status symbol in society. However, due to rapidly increasing car prices, it becomes difficult for a new stage individual to invest a handsome amount in purchasing a car. It is more difficult for an unemployed individual who has dreamt about owning a car.

That’s where purchasing a used car comes in the loop! But what about the finance for the said unemployed individual? Well, that’s not too difficult to manage! Let’s drill down in the details of how an unemployed individual can avail loan facility to buy a used car in India.

How can an unemployed individual obtain a loan for a used car?

Usually, the bankers have a set of conditions in case you require a loan. The normal criteria for obtaining a used car loan is decided from for the employed or self-employed category of individuals. Does this mean an unemployed person would never get a used car loan? Absolutely not! There may be similar or different criteria for a used car loan eligibility.

For a minute, think from the lender’s perspective. It finances you a loan for something. What does the lender expect from you in return? It expects assurance of recovery of the principal amount, lower risk and timely serving of interest payments. That’s it! Hence, there are ample options available for an unemployed individual:

1.     Loan against FD:

If you have a fixed deposit with a bank, the same can be used as collateral to finance your requirement. Your FD effectively acts like an OD facility. In case the FD advice is jointly held, then the written content of the co-holder is required to be submitted to the banker. You don’t need to break your FD in such a case. Your effective interest cost is the difference between the FD interest rate and the used car loan interest rate.

2.     Loan against Gold:

There is no value generation if the gold is stored in a bank locker. Why not use the invested asset? Gold acts as the best medium as collateral.  The used car loan interest rate would be considerably lower due to the high value of gold as collateral.

3.     Loan against property:

Properties can be used as collateral for obtaining a used car loan. The used car loan interest rate would be drastically low in such cases due to the high value of the collateral. However, note that the lender will have a claim on the property if you are unable to make the payments on time and this can be risky.

4.     Loan with a co-applicant:

A co-applicant who has a high paying job and provides proof of consistent income can help you to get a used car loan. In such a case, the co-applicant becomes a guarantor for your loan. This means if you are unable to repay the amount in time, the co-applicant is held liable to make good the delay.

5.     Higher amount of down payment:

The assurance of the lender increases when you offer a sizable down payment against the used car loan. The lender effectively finances only a smaller portion of the price of the used car. A lower lending amount reduces the risk of the lender, reduces your interest cost and increases your credit profile if you make timely payments.

6.     Loan against the existing car:

This is another option where you can pledge your existing old car against a used car loan. Existing old cars may have higher maintenance or running costs. This option is feasible for you if the cost saved on maintenance is higher than the interest cost of the lent amount.

7.     Proof of alternate source of Income:

Alternate sources of income can be rental income from house property, a pension income from the government, interest from the high amount of fixed deposit, etc. Such income streams are visible on your income tax return and this proof can be used for obtaining the loan.

8.     Good credit score:

Good deeds always pay off well. Your timely payments of earlier loans have provided an assurance of your credit character i.e., your ability & attitude to repay any loan. Use this positive credit in your difficult times.


Unemployed individuals are usually charged a little higher interest rate. The better option is to provide collateral security to reduce the interest cost. Used car loan interest rates plays a significant role in determining the EMI. You can check the monthly used car loan EMI calculator to obtain clarity about the EMI amount. Accordingly, you may decide the as per varied options discussed above.

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