If your monthly car loan EMI has crept up, or you’re self-employed and paying a high rate because documentation is limited — refinancing can help. In 2025, lenders and NBFCs are offering flexible refinance options for borrowers with varied credit profiles. This guide explains who can refinance, the exact documents lenders expect, step-by-step process, costs to watch for, and practical tactics to secure a better rate even with imperfect credit.
Use the built-in refinance calculator below to estimate savings, and follow our checklist to increase your chances of approval.
Who Should Consider Refinancing?
Refinancing isn’t for everyone — but it’s a smart move when:
- Your current interest rate is significantly higher than market offers.
- Your EMI is straining your monthly cash flow and you want lower EMIs.
- Your credit profile or income proof has improved since you took the loan.
- You’re self-employed and can now document higher/stable income.
- You bought a second-hand vehicle and now have better options for refinancing.
Eligibility: What Lenders Look For
Eligibility varies by lender and borrower profile. Here’s what banks and NBFCs commonly evaluate:
For Borrowers with Bad Credit
- Credit score: many lenders prefer 650+, but some NBFCs consider 600+ with compensating factors.
- Timely recent payments: 6–12 months of on-time payments improves approval odds.
- Lower DTI (debt-to-income) improves feasibility even if score is low.
For Self-Employed Borrowers
- ITRs for 2–3 years, audited P&L (if available), and bank statements (6–12 months) are key.
- GST / business registration documents and client contracts help in lieu of salary slips.
- Lenders may ask for higher margins (larger down payment) or shorter tenor for self-employed cases.
For Second-Hand Cars
- Age & condition of vehicle matter; many lenders have maximum age limits (e.g., 10 years).
- Clear RC, insurance, PUC, and NOC (if previous loan exists) are required.
Documents Checklist (Downloadable)
Bring a complete set — it speeds approvals. Key documents by borrower type:
- All borrowers: PAN, Aadhaar/Passport, current loan statement, RC copy, vehicle insurance.
- Salaried: Last 3–6 months’ salary slips, employer certificate, last 6 months’ bank statements.
- Self-employed: ITRs (2–3 years), audited accounts or P&L, GST returns, business bank statements (6–12 months).
- Second-hand vehicles: Sale invoice, NOC from previous lender (if foreclosed), vehicle inspection report.
Get Pre-Qualified with Infinity Finance
How Refinancing Works — Step by Step
- Soft pre-check — request pre-qualification to see likely offers without a hard credit hit.
- Compare quotes — interest rate, tenure, processing fee, valuation charge, prepayment penalties.
- Submit docs — upload documents; lenders perform verification.
- Loan approval — get sanction and detailed offer letter (read the fine print).
- Disbursement / balance transfer — new lender pays off the old loan; you start new EMI schedule.
- Post-close tasks — update standing instruction, check statements, ensure foreclosure of the old loan.
Use the Calculator: Will Refinancing Save You Money?
Enter your current loan details and a potential new offer to estimate monthly & total savings and break-even months.
How to Get Approved with Bad Credit or Irregular Income
If your credit score is low or you’re self-employed, use these practical tactics to improve approval odds and possibly reduce the offered margin:
- Add a co-applicant: A creditworthy co-applicant (spouse/parent) significantly improves approval chances.
- Larger down payment: Lower LTV reduces lender risk and can lead to better pricing.
- Provide alternate documents: For self-employed borrowers, give audited ITRs, GST returns, and client contracts.
- Show recent on-time payments: A 6–12 month history of punctual payments reduces perceived risk despite earlier delinquencies.
- Negotiate with proof: Get pre-approval quotes from multiple lenders; use them to negotiate better margins.
Cost Considerations: Fees, Penalties & Break-Even
Don’t focus only on the headline rate. Compare total cost:
- Processing fee: One-time charge by the new lender (often 0.25%–1.5% or fixed).
- Valuation & legal fees: If the lender needs to value the vehicle or charge legal document checks.
- Prepayment/foreclosure penalties: Your existing loan may charge to close early; add this into your break-even calculation.
| Item | What to check |
|---|---|
| Processing fee | Will the fee negate your monthly savings? Calculate break-even. |
| Foreclosure charge | Old lender may levy a fee—include it in costs. |
| Tenure | Longer tenure lowers EMI but adds interest—aim for balanced tenure. |
Which Lenders Are Best for Your Profile?
Options vary by borrower type:
- Major banks: Competitive rates for salaried borrowers with strong docs.
- NBFCs: Often more flexible with self-employed applicants and second-hand vehicles.
- Credit unions / smaller banks: May offer attractive local offers, especially for members.
- Aggregator platforms: Useful for quick comparison and pre-approval quotes.
Real-World Examples
Case A – Salaried borrower: ₹6 lakh remaining, 36 months left, current rate 11.5% → EMI ₹20,403. Refinance to 9.5% → EMI ₹19,551. Monthly saving ₹852; if fees ₹5,000 break-even in ~6 months.
Case B – Self-employed borrower: Cleaner ITRs and 2 years of stable income allowed refinancing from 13% to 10.25% via an NBFC, reducing EMI and improving cash flow.
FAQs
Can I refinance with a credit score of 600?
Yes — some lenders and NBFCs consider applications at ~600 if compensating factors exist (co-applicant, higher down payment, steady recent payments).
What documents do self-employed borrowers need?
Usually: ITRs for 2–3 years, bank statements, GST returns (if applicable), business registration documents, and audited P&L where available.
Will refinancing affect my credit score?
Applying may cause a soft or hard inquiry. Properly managed, refinancing can improve your score over time due to better payment history and lower credit burden.
Next Steps & How Infinity Finance Helps
Infinity Finance compares refinance offers, helps prepare documentation, negotiates with lenders, and speeds up approval. Start with a free quote:
EMI Calculator Apply for Refinance
Conclusion
Refinancing a car loan in India is a practical way to lower EMIs or overall interest — even with bad credit or irregular income — if you prepare the right documents, compare total costs (including fees), and use negotiation or co-applicants to improve terms. Use the calculator above, check options, and consider professional support to speed approvals and reduce paperwork.
Article last updated: 2025