Things to know before taking an Car Loan in India
There are a few things that you need to know before taking an car loan in India. Let’s go through them one by one.
- The type of car loan that you can take:
Two kinds of car loans are available in India - secured auto loans and unsecured auto loans. Secured auto loans are loans taken against collateral or the safety net of an asset like a car, a house, etc.
Unsecured auto loans are loans not backed by any collateral. You can use an unsecured auto loan to buy a new car or a used car over 5 years old.
- The amount of money that you can borrow:
This is the most important factor you must consider before taking an auto loan in India. The money you can borrow depends on your income, the car’s worth and the repayment terms. Different auto finance companies will offer you different rates of interest too.
- The repayment period of the loan:
You need to decide how long you will need to repay the car loan. Some auto finance companies in India offer up to 10-year repayment plans. If you choose a longer repayment period, you will pay less each month, but it will take you more time to pay off the loan. If you choose a short repayment period, you will pay more each month, but it will take you less time to pay off the loan.
Step by Step Process of getting an Car Loan
Check your eligibility with multiple lenders in India
Before applying for an auto loan in India, you must check your eligibility with multiple lenders. There are several online auto finance companies that will offer you better deals based on your credit score with them. You can compare multiple lenders and apply for a car loan online.
- Credit Score and Payment History:
The most important factor that will decide you are eligible for an car loan is the credit history or your banking history. If you have a poor credit score, you may not be eligible for a car loan and the rate of interest applicable with a prime lender. A good credit score will ensure the best rate of interest and finance of up to 95 percent (ex-showroom value).
- Constant Source of Income:
Your employment type and salary slab will also influence your auto loan. The amount of money you earn will decide the budget you are eligible for and the rate of interest you can get.
The rule is simple - The older you are and the longer and cleaner your banking history, higher the amount of money you can borrow.
- Loan Purpose:
If you buy a brand-new car, you can get a higher loan than if you are buying a used car. If you are buying a car for your business, you will get loan offers than when buying for personal use.
Select Loan Amount and Tenure
Always decide the amount of loan you need according to your income and then apply. Inflated loans can create a problem as you are needed to pay a high monthly EMI that affects your overall finance. Also, look for the period in which the loan is payable. The higher the duration of loan tenure, the higher is the interest rate you will pay! So do check the amount of the car loan and the aggregate amount (Base amount of loan plus the interest) you will end up paying.
Here is the general list of the documents to be submitted that most banks require. For further information, you are advised to contact your shortlisted lender
1. Following are some of the documents to identify & Address Proof
· Voters ID Card
· Valid Passport
· Job card issued by NREGA
· Permanent Driving license
· Aadhar Card
2. Latest salary slip and Form 16 as income proof
3. Bank statement of the previous 6 months
4. ITR for the last 3 years
Shortlist and apply to one lender
After comparing multiple lenders and checking their car loan offers, you should now have a shortlist of some auto finance companies in India that offer you a car loan. Once you have a shortlist of lenders, you can ask them the following questions:
- What is the maximum loan amount that you can offer?
- What are the rates of interest that you can offer?
- What are the loan terms?
- What are the eligibility criteria for a loan?
- Can I get a loan if I have a poor credit score?
- What documents do I have to provide to get a car loan?
Read Also: How To Buy A New Car: The Complete 5-Step Guide
After this procedure, choose one lender meeting your requirements and apply for your auto car loan! After that, wait for your acceptance letter, and the amount will be sent to your bank account!
So that was all about how to get auto car loans easily. We hope that through this blog, you now know about the factors and step-by-step guide to be followed when thinking of an auto car loan. Follow our blog page for more reads!
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