Buying a car has become extremely easy today. You can apply for a car loan, pay a small down-payment and bring your dream car home within days. The loan can be repaid in pocket friendly EMIs over a flexible tenure. Most banks and NBFCs are affiliated to car dealerships all over the country, which means you do not have to go looking for a lender. That said; it is wiser to do your own research and choose a lender offering affordable interest rates. Here’s a detailed guide on car loans for your perusal.
Before you apply for a loan, you need to check if you are eligible for it. You can use the loan eligibility calculator on your lender’s website to check your eligibility. This calculator also helps you understand the maximum loan amount you can get, based on your income. To be eligible for a car loan in India, you need to be:
- A resident Indian
- Between the ages of 21 and 60 years
- A salaried professional working with a reputed organisation or a self-employed individual
- Earning a minimum net monthly income of ₹15,000 to 20000, depending on the city you are based in.
- Able to show a minimum work experience of 3 years and employed with the same organisation for a minimum period of 2 years.
Apart from the above mentioned eligibility factors, lenders also check your credit scores, which should be over 750 points to be eligible for the loan.
Documents required while applying for the loan
You need to provide the following documents when you apply for a car loan:
- A photocopy of any one identity proof document; PAN, Aadhaar, Voter’s ID, driving license and passport are accepted by most lenders.
- A photocopy of any one address proof document; Aadhaar, Voter’s ID, driving license and passport are accepted by most lenders.
- Salary slips of the last three months
- Bank statements of the last three months
- Copy of credit score document
Most lenders today allow you to apply for car loans online. If you opt to apply for the loan online, you have to provide scanned copies of the above mentioned documents along with the duly filled loan application form.
The loan application process
You can apply for the loan by visiting the nearest branch/office of your preferred bank or NBFC respectively. There, you need to check if you are eligible for the loan, fill the loan application form and submit photocopies of the above mentioned documents. Remember to carry originals for verification.
You can also apply for the loan online by visiting the lender’s website. Fill the application form available on the car loan section of the lenders website, attach scanned copies of the necessary documents and send your application.
Loan amounts are generally disbursed into the applicant’s savings account within 48 hours.
Features and benefits
The following are the main features and benefits of car loans:
- Loans are sanctioned without hassles with minimal documentation.
- The amount is directly disbursed into your account within 24 to 48 hours.
- Loans can be repaid in flexible tenures lasting up to 7 years or more.
- You can get the loan at competitive interest rates, which you can negotiate if your credit scores are good.
- You can repay the loan in pocket-friendly EMIs without compromising your mandatory monthly expenses.
- You can get financing of up to 90% of the on-road price of the vehicle.
- Loans can be availed for both, new as well as used (second hand) cars
- The online loan application facility allows you to apply for the loan without visiting the lender’s office.
Things to remember while applying for the loan
Before you send out your car loan application, there are a few things you need to remember. They are as under:
- Lenders levy a variety of fees such as loan processing fees, pre-closure and foreclosure fees, stamp duty charges, penalties for defaulting on loan EMI and so on. Consider these charges while applying for the loan
- Instead of applying for a loan suggested by your auto-dealership, you should compare the different lenders and choose one offering lower interest rates.
- Car loans online are unsecured loans and you don’t have to provide any collateral. That said, the car itself serves as collateral and the lender can seize it if you fail to repay EMIs.
- Consider opting for shorter tenure loans as they can help you get low interest rates
- Use an EMI calculator to check the monthly EMI payable before sending your loan application.
Final word: Car loans help you fulfil your dream of bringing home your dream car. The application process for loans for both, used and news car is incredibly simple. As long as you follow the due processes and show loan repayment capacity, lenders will happily sanction your loan.
Neha Sharma is a finance student who loves to write in her free time. She has spent a considerable amount of time researching about car loan. Through her work, she has given an overview of the concept