A car is a necessity in today’s world, but purchasing a car is by itself a huge task, especially with the rising prices. In this era of inflation, one of the most ideal ways of purchasing a car is by availing a car loan. While some may think the loan process appears to be a complication, taking a loan by following the correct procedures is actually a simple task. Just keep the documents required for car loan ready with you, and we will help you with the procedure.
From deciding the amount and tenure, to the bank or financial institution with which you want to apply for the loan and the documents required for car loan, this blog contains all the important aspects.
Without further ado, let's go through this step-by-step guide on how you can avail of a car loan -
1. Decide the amount
If you wish to take a car loan, the amount of the loan is the first thing you need to decide. The amount will determine the kind of car you would purchase. Deciding the amount of your budget should be based on factors like the initial cost of the vehicle, other costs like maintenance, insurance, fuel, etc., over the time span you keep your vehicle.
If you have figured out the budget, you have solved half of the affordability issue and worked your loan application according to your budget. The one perspective which you need to contemplate is that the cost of owning a vehicle doesn’t end after the loan is paid off; it consists of numerous other expenses as well. Your budget would help you shortlist various car options.
2. Decide on the vehicle
Once you decide your budget, there will be infinite options of cars available which you can choose and finance accordingly. So, the next step is to choose a car which you want to finance. It covers various aspects like the car, the type of car (petrol/diesel), kind of accessories you wish to have in your car. Even though you might have a specific car in your mind, there are loads of aspects that you need to decide to determine the final cost of your car, which would help to determine your financial requirements. After deciding on a car, your loan process is most likely to begin.
3. Check your eligibility
Now that you have chosen your car, you need to ascertain whether you are eligible to avail of a car loan at your financial institution or not. There are various indicators online where you could consider your eligibility for a car loan. You can also contact your bank to get more details.
If you are not eligible, you cannot continue your loan process further. So, to ensure eligibility, you need to ensure a good credit score, proper compliance with all the bank procedures, clearance of all previous dues, along with a proper income source. If you have completed the entire checklist of your financial institution, you are eligible to continue your car loan process. If you are not eligible, you can either reduce your budget or contact any other financial institution. This eligibility differs from city to city and occupation to occupation and income to income.
4. Figure out your loan details
Once you find you are eligible to avail of a loan, you need to figure out important loan details like the duration of the loan, its amount, tenure, down payment, and EMI amount. There are different bank loan offers running from time to time which could be availed accordingly.
Interest rates should also be taken care of as it would determine the final amount you are going to pay to the bank. Once you find your loan details to be suitable, you can easily avail of your loan by choosing the ideal offer. But in order to finalise and apply for the loan, you need to check these details in an intricate manner.
5. Check documents required for car loan
Once you find your loan details to be suitable, you need to ensure that you have all the documents required for the car loan. To apply for a loan, you need to submit all the documents to your bank in the required form. These are some of the documents required for a car loan that you need to have for your car loan application:
6. Apply for a car loan and book your car
After checking your documentation and loan details, you need to apply for a car loan at your nearest bank. The bank application form must be duly completed while filling in all the accurate details. If the documents required for car loan are clear, the loan application process will take only minutes. You then need to wait for your loan to be sanctioned.
Once your loan is sanctioned, you can then visit your car dealer and pay the finance value of your car’s price to the dealer. The bank usually submits your funds directly into your bank account, and once all the formalities are done, you can easily take possession of your car.
Availing a car loan may seem like a hassle, however if the documentation and procedure is taken care of, the process can be simplified and help you get the car of your dreams. You can easily manage your finances and fulfil the dream of a car without any hassle with a car loan. So, if you are planning to avail of a car loan in the future, don’t forget to use these tips for your car loan application.
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Q. How are car loan interest rates determined?
Ans: The interest rates of car loans are determined on the basis of various factors like the location of the customer, customer profile, along the tenure of the loan. These factors determine what would be the final interest rate for your car.
Q. What is the collateral for your car loan?
Ans: A car loan is a kind of secured loan where the car customer is buying and acts as collateral. No additional collateral is demanded from the consumer, but you need to endorse the RC (Registration Certificate) of your car with your bank, which is canceled after full payment of the loan.
Q. What is the typical duration of a car loan?
Ans: The typical duration of a car loan ranges from one year to five years. The short tenure of a car loan reflects a higher EMI, whereas a long tenure of a car loan reflects a lower EMI.
Q. What are the situations where a car loan application might be rejected?
Ans: A car loan application might be rejected in scenarios like poor credit score, inability to fulfil bank’s eligibility criteria, and rejection of loan multiple times along with defaults in repayments.
Q. Are car loans available for used cars as well?
Ans: Yes, car loans are also available for used cars that are usually not older than 5 years.