Getting a car loan is very easy and you can get one in a few simple steps. Almost all banks and lenders these days allow you to apply online and make a paperless application.
Although different banks offer different procedures for getting car loans, the basic procedure is the same. The first step of getting a car loan is finalising the brand and model of the car that you want to purchase. Next, you need to check your eligibility for the loan. You can do so by visiting the website of the bank and checking if you meet the eligibility criteria.
The next big step is to figure out your loan amount. It will depend on how much you can pay now, for long do you want the loan to go on and the interest rate. You can use the EMI calculators available on banks’ websites to decide on your loan amount and tenure.
Once you’ve decided on the car model, the bank as well as the loan amount and tenure, you can begin the application process. You can either visit a branch or apply online by visiting the bank’s page. You will need to submit an income proof, age proof, identity proof and address proof. Some banks take seconds to approve your loan. Once approved, funds are transferred instantly to you account. You can then book your car.
How Car Loan works in India
Consider this scenario: You want to purchase a four-wheeler and have your heart set on a car. But you don’t have enough funds to buy the car. In such a case a bank or a lender will pay the car dealer in full or part on your behalf. Now you have to pay the bank or lender over a period of time, plus the interest charged by the bank or lender for the advance.
What you pay to bank is an instalment every month. This instalment is inclusive of the amount payable, the interest charged as well as the processing fee. This monthly instalment is called an Equated Monthly Instalment. The EMI for your loan is dependent on the tenure of your loan. The longer the tenure, the lower is the EMI and the shorter the tenure, the higher is the EMI.
As explained earlier, if you are planning to purchase a brand new car from a showroom, you are eligible for a New Car Loan from a bank or lender. If you are eyeing a brand new car but do not have sufficient funds in your pocket to make the purchase, banks or lenders will come to your rescue. Car loans work as a cycle for banks and lenders. They use the payment made by loanees to further lend it future loanees.
Apart from a rate of interest and a processing fee, banks and lenders may also apply a premium to the rate at which you are borrowing. The details will be available with the banks and make sure to ask about all the fees and premium on the loan.
Car Loan process
The Car Loan application process is very simple. Once you have decided on the model and make of the car that you want to purchase, you can compare the different car loans available at different banks. You can check your eligibility with each of the banks. Choose the right car loan with a bank of your choice. Make sure you are eligible for the loan before applying so that your application is not rejected.
To apply for a car loan, you can either visit a branch of your bank or log on to the website of the bank. The online application process is faster, paperless and hassle-free. To apply for the loan you need to submit the following documents: income proof in the form of salary slips for the last three months or bank statement for three months or income tax returns filed for the past three years. You have to submit identity proof in the form of PAN card, voter’s ID, driving licence, passport or Aadhaar Card. You can submit the same as your age proof too. As your address proof you can submit copies of electricity/ gas bills, voter’s ID, Aadhaar Card, Ration Card or bill of Life Insurance.
Once you submit copies of these documents, your application process is complete. It is now up to the bank to approve or reject the application.
Car Loan Approval Process
In the new age of the Internet, car loan applications are processed instantly. If you apply for a car loan online or offline and submit all the required documents, it is not the bank’s call to start the process.
The bank will verify the documents at its end and check the applicant’s credit score. The bank will also check if the applicant is eligible for the loan. This process takes a few seconds. If the applicant is found to be eligible, the bank approves the loan instantly. Most banks approve loans instantly these days. Just make sure you are eligible for the loan before applying.
Once the loan is approved, the funds are directly transferred to the applicant’s account within seconds. You can purchase the car as soon as funds are credited to your account.
You can avail quick funds at a time of need using a loan against your car. If you are eligible for such a loan, the loan amount is transferred to your account almost instantly. What you are doing is turning your existing car a collateral to gather funds to purchase a new car or for an emergency.
What are the documents required for a car loan?
For the successful application for a car loan, you will need to submit an income proof, identity proof, age proof and address proof. As income proof you can submit three months’ salary slips or you income tax returns or your bank statements. As age and identity proof, you can submit Aadhaar Card, PAN Card, driving licence, voter’s ID and any other government identity proof. As your address proof you have to submit electricity/ gas/ telephone bill, Aadhaar Card, Voter’s ID, Ration Card or any other government address proof.
How can I check my eligibility for a car loan?
Almost all banks and lenders provide an application on their website where you can check if you are eligible for car loan. You can also visit the nearest bank branch and ask for the eligibility criteria. However, it is faster and easier to check online. Some third party websites also provide a single platform to check eligibility for multiple loans.
How will know how much EMI I have to pay?
Even before you apply for a. car loan, you can check the EMI you will be required to pay for a range of tenures. Banks and lenders provide an EMI calculator on their website. You can input your loan amount and the tenure for which you wish to take a loan. The calculator will give you your estimated EMI for the desired tenure. You can then decide on a correct tenure based on these calculations.
Why is it important to have a good credit score before applying for a car loan?
The credit score of an applicant is a measure for the bank to decide how well-deserving the candidate is for a loan. If you have a habit of maintaining your financials and meeting your financial commitments timely, you are less likely to default on a loan. Therefore you are a good candidate for a loan. A credit score above 750 is considered good enough for a car loan.