No matter which city or town you reside in, owning a car is convenient when you have to run errands around the city or want to take a long trip with family and friends on the weekends. Purchasing a car of your choice is no longer a dream or a luxury, it has become quite easy with numerous auto financing options available to potential customers across the country.
Applying for a car loan online is a quick process with just a few clicks of your mouse. However, before applying for an auto loan to purchase your dream car, there are 5 important things that you should consider in order to get a suitable deal.
- Car loan eligibility: Find out if you are eligible for a car loan by checking the eligibility criteria set by the lender. Car loan eligibility criteria vary from lender to lender. Some lenders offer online car loan eligibility calculator to help you find out how much loan amount you are eligible for. If you apply for a car loan without checking your eligibility, then in case of loan rejection, your credit score will be affected negatively. Therefore, make sure you meet the eligibility criteria before submitting your car loan application. The following are the criteria that you should meet:
- Age limit – 21 to 60 years
- Annual income – Rs.25,000 to Rs.40 lakh, depending on whether you are a self-employed or salaried person
- Employment status – Minimum 2 years of continuous work experience in the same field
- Credit score – 700 and above
- Debt-to-income ratio – Your monthly debt expenses should not be more than 40% of your monthly income
- Car loan interest rate: The higher the rate of interest, the higher the overall interest you have to pay over the chosen loan tenure, subsequently higher the total cost of your car loan. Hence, it is wise to choose a car loan offer with a lower interest rate. The rate of interest varies from lender to lender; therefore, you have to compare various car loan deals across lenders to find one that best suits your needs. Car loan interest rate starts from 9.2% p.a. The interest rate changes depending on whether you opt for a new car loan or a used car loan, the make and model of the car, your area of residence, and your loan eligibility.
- Necessary documents for car loan: To establish your age, identity, address, income, and employment status, you are required to submit supporting document proofs to the lender. Along with a duly-filled car loan application form that can found online or at the branch office of the lender, the following documents have to be provided when applying for a car loan:
- Age proof – Aadhaar card, PAN card, Passport, birth certificate, 10th school certificate, or Driving License
- Identity proof – Aadhaar card, Voter’s ID card, Passport, PAN card, or Driving License
- Income proof – Form 16, ITR of last 2 years, salary slip of last 3 months, bank statement of last 3 months, employee ID card in the case of salaried applicants, business certificate and profit & loss statements in the case of self-employed individuals
- Address proof – Utility bills like electricity or telephone bills, Aadhaar card, PAN card, Passport, etc.
- Car loan fees and charges: Lenders levy certain fees and charges on car loan borrowers like processing fees, late payment charges, foreclosure fees, part payment penalty fees, stamp duty charges, and so on. Always make it a point to check the various fees and charges levied by the lender before applying for a car loan in order to avoid any hassle later on. Most lenders are transparent about the applicable fees and charges that they levy.
- Car loan EMI calculator: This online tool will help you choose a suitable loan tenure and an affordable loan amount. It is available on most lenders’ websites and reliable third-party websites. To find out the monthly cost and total cost of your car loan, all you have to do is enter key details such as preferred loan tenure, loan amount, interest rate, and processing fee into the tool and click on the ‘Calculate’ button. You will get instant and accurate results with details such as Equated Monthly Instalment (EMI), interest, principal amount, and outstanding due each month. Depending on the result, you can adjust the loan amount and loan tenure to arrive at a car loan cost that you can afford to repay without defaulting. The displayed result is only an approximation, for actual figures, you have to get in touch with the lender.
Car loan application process
Applying for a car loan is easy whether you choose to do it online or offline. In the case of online mode, visit the lender’s official website or a reliable third-party website, check your loan eligibility, find out the total cost of your loan using the EMI calculator, then fill up the application form, and submit it along with the necessary documents to the lender.
In the case of offline mode, visit a branch office of the lender, be it a bank or a non-banking financial company (NBFC), fill up a car loan application form, and submit it along with the necessary documents. The lender will cross-verify the information provided by you and after the successful verification process, will draft a car loan agreement. Sign the loan agreement after agreeing upon the terms and conditions of the car loan. The loan will be disbursed to your bank account directly within a few minutes.