Step-By-Step Guide On Car Loan; Eligibility, Application Process And More

There are high chances that the car you want to own is beyond your current financial reach, and this is where car loans prove invaluable

The prospect of acquiring your dream four-wheeler is undeniably exhilarating, representing a significant step towards a more fulfilling and prosperous life. Owning a car is one of the biggest financial plunges that an individual takes in life. It not only eliminates your transportation challenges and reduces additional expenses but also enhances your social status. 

However, there are high chances that the car you aspire to own is beyond your current financial reach, and it is certainly impractical to exhaust all your savings on a single purchase. This is where car loans prove invaluable.

These financial arrangements, extended by banks or financial institutions, facilitate the acquisition of desired vehicles for personal or commercial purposes. Securing a car loan from banks has become increasingly streamlined and accessible. With convenient monthly instalment plans, repaying the borrowed amount becomes manageable. Thus, it presents a mutually beneficial arrangement, enabling you to make a prudent investment in your ideal vehicle while avoiding undue financial strain. 

How To Apply:

Many lenders offer the convenience of applying for a car loan online. To begin the application process, you'll need to visit the lender's official website. Once you apply for a loan, you can submit the required documents online. If you have a good credit score, some lenders may even offer pre-approved car loans, eliminating the need for document submission.

Alternatively, you can visit a bank branch to apply for a car loan. You'll need to submit the necessary documents, and once the verification process is finalised, the loan will be sanctioned.

Eligibility Criteria:

Car loan eligibility criteria may vary among different banks, but there are some common requirements. Typically, individuals must be between 18 and 75 years old to qualify. They should also have a minimum net monthly income of Rs. 20,000 and a minimum of one year of employment with their current employer. Additionally, applicants must be either salaried or self-employed, working for either a government establishment or a private company. These criteria serve as general guidelines for individuals seeking car loans across various financial institutions.

Documents Required:

To facilitate a smooth loan application process with your chosen bank or financial institution, it's imperative to provide the following mandatory documents:

Valid Identity Proof: Applicants must provide valid ID proof, such as a PAN card, Aadhaar card, driver's license, passport, or any other government-issued identity document.

Age Proof: Applicants must provide a document clearly stating their age. Accepted documents include a driver's license, passport, ration card, school leaving certificate, or any other government document indicating age.

Valid Address Proof: It is crucial to provide a government-issued document with the current address mentioned. Accepted proofs include an Aadhaar card, PAN card, etc.

Income Proof: Applicants should submit the appropriate income proof, depending on their employment status. Salaried individuals are typically required to provide the current six months' salary slips, the last three months' bank statements, Form-16, updated ITR, etc. 

On the other hand, self-employed individuals should furnish the past three months' bank statements, balance sheets, P&L accounts, ITR, etc.

Signature Verification: A proof of signature verification is necessary to ensure uniqueness.

Recent Photographs: Two copies of recent photographs, ideally consisting of two passport-sized and stamp-sized photographs, should be provided.

Application And Approval Process:

Firstly, it's crucial to check your credit score, as this plays a significant role in determining loan eligibility. Banks typically favour applicants with a good credit history. Next, fill out the loan application form provided by your chosen bank, ensuring all required documents are attached and the form is accurately completed.

The bank will then verify your application and documents, assessing your profile and credit score to determine your eligibility for the loan. Your application will proceed to the next stage if you meet the criteria. The approval typically takes 1 to 5 days, though this timeframe may vary depending on the bank and the applicant's profile.

Upon loan approval, the loan amount will be transferred either to your bank account or directly to the car dealer from whom you intend to purchase the vehicle.

Things To Consider Before Taking A Car Loan:

Car loans are typically sanctioned for approved car models from either Indian or foreign manufacturers. However, the specific funding amount is subject to the bank's discretion. Additionally, banks typically offer car loans with interest rates ranging from 10 per cent per annum to 18 per cent per annum. However, the actual interest rate is determined by factors such as the borrower's profile, loan tenure, and loan amount.

Borrowers typically have the flexibility to select a car loan repayment period ranging from 1 to 7 years, based on their repayment capacity. In certain circumstances, the repayment tenure can be extended. Depending on the bank, additional charges may apply, including loan processing fees, pre-closure or foreclosure charges, stamp duty fees, late payment penalties, and part payment charges.