A car loan is definitely one of the most popular loan products in the country. Arvind applied for a car loan at an early age with the dream of buying his favourite car. He researched thoroughly about the different loan providers in India and the benefits of every type of loan. More than 80% of people, who purchase cars, opt for car loans and financing options. Not many of them though pay attention towards the procedure of applying for the loan. To apply for car loan, there are certain considerations which are to be kept in mind. Overlooking these factors might get you into trouble as far as getting the auto loan goes. Planning ahead for the unwanted surprises hidden in the loan application procedure will help you in getting one step closer to your dream vehicle!
In case you are planning to take a car loan, you shouldn’t get too excited as there are various hurdles which you’ll have to cross to get through the entire procedure. Have a look at some of the key considerations which might come in handy as far as applying for a vehicle loan goes.
Have your documents in place
The major reason why some loan applications are rejected at the first stage is the absence of crucial documents. To get an auto loan quickly, you need to keep the following documents ready to be filed with the application.
- Rate List/Pro-forma Invoice
- Signature Verification Proof
- Bank Statement
- Income Proof
- Residence Proof
- Picture ID proof
- Age proof
What rate of interest is being charged by the bank?
Keeping an eye on the rate of interest being charged by the bank is an important consideration. Carry out extensive online research to know the rates charged by the various banks in your area. Paying the EMIs with a high rate of interest can help bring down your savings, and so you must do your homework. Even though the rate of interest is calculated by considering various factors such as the kind of auto loan, loan duration, and car model, you must find a bank which suits your budget. Sometimes, even negotiation helps you get special concessions on bank loans.
Credit Score and History
No matter what kind of loan you are applying for, your credit score and history will definitely come into play. An individual with good credit history is likely to be sanctioned the loan without much trouble. The credit score is also used to evaluate the rate of interest that will be charged from you. So, before you apply for auto loan, you must try and make some monetary adjustments here and there so that your credit history appears to be absolutely clean!
The eligibility factor to be considered
Banking institutions only approve the loans of the individuals who are eligible for one. All the major banks have set certain eligibility factors which are to be fulfilled by the borrowers in order to apply for the loan. So, do all your calculations carefully and try to meet the requirements to get your hands on a decent amount of car loan.
Having a third party guarantee
A lot of banking institutions ask for a third party guarantee if the amount is a big one. So, you must have a relative or friend who could guarantee the loan. In case you have a very good credit history, then you might not have to offer a third party guarantee.
Keeping the processing charges in mind
All the banks are known to charge a hefty processing fee on the loan which can either be a percentage of the loan amount or a flat fee. So, you should always keep this fee in mind while applying for a loan. Try and compare the fee charges offered by different banks to arrive at a sound decision.
|Bank Name||Processing Fee Charged|
|HDFC Bank||Rupees 2, 625 to Rupees 4,950, For Corporate Clients Rupees 1, 500|
|State Bank of India||0.5% of the total loan amount|
|Bank of Baroda||0.75% up to 15 lakh, Maximum Rs 10, 000|
0.5% above 15 lakh, Minimum Rs 10, 000, No Max LimitCanara Bank0.1% of the total loan amount, Min Rs 250, Max Rs 500Corporation Bank1% of the total loan amount, Min Rs 1, 000
As on 21st February, 2014
Avoid lucrative packages
There are various dealers who provide auto loans in addition to accessories and the vehicle as they have special tie-ups with car financiers. These dealers are entitled to get a commission from the bank as they help them source the loan. However, if you think practically, then these kinds of car loans don’t really make any sense. Here, the cost of the car gets hiked big time and you might end up paying a lot more than what you should have.
In the car loan market, situations change every day so you must keep a close eye on your alternatives for better car loan deals!