Finally getting the car of your dreams? But wait! Do you know everything about the Car Loan application? Read on to know more.
Are you tired of taking the bus or paying the surge price every time you book a cab? Or maybe you have a two-wheeler and you’re tired of getting drenched in the rain. Whatever it is out of these (or just for the sake of fulfilling your dream car fantasy), it’s time for you to buy a car. What? Your bank balance doesn’t agree with this idea? Well, that’s why Car Loans were made. To help you sail through tough financial times and drive the vehicle of your dreams at any cost. Now, choosing the right loan might be a problem. Let’s first check if you’re eligible.
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Are You Eligible?
The eligibility criteria for a Car Loan might vary from one lender to another. You need to choose the one that suits you the best. The financial branches of some automobile companies, like Tata, offer loans if you buy their cars. But, in case you plan to buy some other make, you’ll have to consider visiting all the leading banks around.
To make things easier, here are the eligibility criteria for a Car Loan:
- Age: 18-75 years
- Income: Above Rs 10,000 per month
- Employment: Total work experience must be > 3 years; and > 2 years in the current position/business/profession
- Model of the car: Only the approved models are eligible for a loan
- Other factors include your residential area and stability of your stay at the current residence
Now that you know the basic eligibility criteria, we can move to the next part—choosing the right loan.
How To Choose The Right Car Loan
Deciding which Car Loan to go with depends on a couple of crucial factors. Don’t panic! It’s nothing too complicated. Just a series of things you need to keep in mind. Here we go:
Before jumping on other factors that can influence your Car Loan, let’s start with the basic (and probably the most important of them all)—the loan amount. It directly depends on your savings and how much you can pay as down payment. It’s advisable to make a heavy initial payment instead of borrowing a huge amount. Why? Because it can significantly reduce your financial burden in the future and give you enough time, energy and resources to focus on other essentials of your financial security like a house, your retirement planning, building an emergency fund etc. Now’s when all your savings can come to your rescue. They can save you from the wrath of a long-term loan and tons of EMIs. Other important factors that decide your loan amount are the car model you’re aiming for and whether you’re going for a new or a used car.
While some people prefer short-term loans, some like to go for the long-term option. The major difference between these two types of people is that the former lot is okay with paying heavy EMIs, while the latter likes going easy on the EMIs. You can decide whether to opt for a long-term or a short-term loan option based on your current financial situation and other financial commitments. For instance, if you already have an Education Loan to repay, maybe a long tenure Car Loan makes more sense for you. But if your finances are pretty set otherwise and the only burden you have is that Car Loan, maybe you should go for the short-term option.
One of the most crucial factors to consider while choosing the right Car Loan offer is the rate of interest. This can vary depending on a couple of factors like the risk associated with the borrower, the bank (different banks offer different rates) etc. You need to look for the best interest rates before finalising any Car Loan offer unless you want to waste your money paying unnecessary interest.
The rate of interest isn’t the only number you need to worry about. There are other crucial things like processing charges, prepayment, and late penalties. There could be a possibility that you might want to prepay your entire loan amount instead of continuing to pay those EMIs. In such a situation, it won’t make any sense if you have to pay heavy prepayment charges. To avoid that messy situation later, it’s better to find out about these charges in advance.
Additional Reading: What to look for in a Car Loan agreement!
We hope these tips help you choose the right Car Loan offer. Once that’s done, the next thing you need to worry about is the Car Loan application. Don’t worry. We’ll decode it all for you. What are the essentials involved in a Car Loan application? Let’s find out:
Clear The Terms With Your Financier
Getting the best possible deal should be your motto. And that’s possible only if you clearly discuss all the terms and conditions of the loan with your lender. What sounds like an unnecessary exercise now can prove to be quite beneficial in the long run. Try to make the most of all the current available offers. Another key part of your Car Loan application is the documents involved in the process. It’s better to clear everything about the last date of submission of these documents by talking to the representative of the bank. You don’t want your carelessness hampering your Car Loan application, do you?
Probably the most tedious part of any loan agreement is getting all the required documents right. This is one step where your involvement has to be the maximum. You need to be careful about the validity of these documents while producing them. What are these? They will include—your identity proof, address proof, salary statements, bank statements for the last six months, a copy of IT returns from last two years, a copy of company financial audit report (in case of private firms), proof of residence and age along with proof of signature. Got all these in place? Cool! We can now proceed to the other essentials.
Processing The Loan
So, applying for the best Car Loan available isn’t all. You need to go through the process of verification of all the stated facts. The first step of this processing is a field investigation. What’s that? A field inspector will visit you to cross check all the details you’ve mentioned in your application. This will include checking your house and work (to verify the addresses). In case the details don’t match, the agent will first try to take your assistance and will contact their manager later. This is the most important part of getting your loan application approved. Once this is done, getting the application approved is not that big a deal.
Additional Reading: Drive Away With These Paperless Car Loans
Loan Approval And Disbursement
What does the approval of your loan application depend on? The validity of the information you’ve submitted. Once all your documents and facts are in place and cross-verified, you can either expect a call from your lender or you can expect to get these details via email. Then follows the disbursement. It’s usually done in a single instalment with the full amount required.
What factors affect the Car Loan application? Let’s find out:
Loan Repayment History
Although you might think that all those previous loans don’t have any role to play in your current Car Loan application, they actually do. Your repayment history holds the power to get your current loan application the green or the red signal. If you’ve made all your payments on time, have a good Credit Score; you’re set. These factors help the banks get a better idea about your financial behaviour and history. They judge you based on your ability and willingness to repay the loan on time. If you want to create a good impression, better look into your repayment history and try to improve it. Now might be a good time to cancel all those unwanted Credit Cards that’re just spoiling your Credit Score and diminishing the chances of a Car Loan application approval.
No, this isn’t the tenure of the Car Loan you’re planning to get now, we’re talking about your previous loans. How long have you been availing credit from the market plays a significant role in deciding the fate of your current loan application. If you’ve had loans from quite some time, but you’re still paying on time, you’re safe. But if you’ve been missing EMIs, there might be a need to worry. Otherwise, maybe you should drop the idea of driving your dream car around the town.
Additional Reading: Your Car Loan EMI Calculator Guide
Are multiple credit enquiries good for your recent Car Loan application? The answer is no. If your records reflect a couple of loans and numerous enquiries, the chances of your current loan application getting rejected increase manifold. That happens because it takes a toll on your Credit Score and therefore, affects your current loan application as well.
Type Of Credit
The combination of different types of credit in your kitty also affects your Car Loan application. If you have a couple of unsecured loans, that might not be too good for your application. But secured loans are considered to be alright. Hang on! Don’t get confused between the two. Unsecured loans include your Credit Cards and Personal Loans, while Home Loans and Car Loans fall under the secured category. Finally, you know which loans are good for you and which aren’t.
Have a better idea about Car Loan applications now? Great! That’s what we aimed at doing. Now that you know pretty much everything you need to, what’s stopping you from applying for a Car Loan? Aren’t you tired of all those creepy people bugging you in your daily commute to work? Now’s your chance to say goodbye to them, for good! Don’t let this chance slip away.