MintGenie explains: Key things to keep in mind before applying for a car loan

An RBI report dated 1 July 2021 shows encouraging growth in the personal loan category, especially housing and vehicle loans. Moreover, the growth in vehicle loans exceeded their pre-COVID-19 levels for both public and private banks, the report said.

Now one can own a car at a fraction of the cost and pay the rest through EMI.

Though there are a variety of options available, one needs to go through certain checks and balances to get a car loan.

Read more: Is it wise to opt for a fixed rate on a car loan in a rising interest rate scenario?

eligibility

To get a car loan, the first and foremost thing to do is to check the car loan eligibility criteria for your desired bank. These include minimum age, minimum annual income, employment status, and/or any other criteria the bank has.

For example, in Axis Bank, for a salaried person, the minimum age should be 21 years, the minimum annual income is Rs. 2.4 Lakh and should be employed for at least 1 year, while minimum age for self-employed person is 18 years, minimum annual income is Rs. 1.8 Lakh- 2.4 Lakh and should be in the same business for at least 3 years. Similarly, one can check the eligibility criteria for their respective banks.

verification

If you are eligible for a car loan, the next step is to verify your identity. To do so, you need to submit identity proof which can be PAN, Passport, Aadhar card, Voter ID as well as address proof which can be utility bill or bank passbook to your lender.

Read more: Thinking of taking a car loan? First analyze these 6 factors

Apart from these, you also have to submit some other basic documents. This includes:

applicationTo apply for a car loan, one has to fill the application form requesting for the same.

KYCThis process requires the applicant to further submit their photographs, identity proof (eg Aadhar card, etc.), address proof (eg Aadhar card, driver’s license, etc.), and age proof.

bank statementApplicants need to submit their bank statement for signature verification.

income proof– For salaried person, need to submit latest salary slip or Form 16 to the bank. For self-employed person, the income proof will be Income Tax Return of last 2 years.

other documentsSome banks may also ask for employment stability proof from salaried individuals or business ownership proof from self-employed individuals.

credit history

This is a very important aspect for availing any type of loan. It reflects your financial stability and gives your lender a clear view of your financial history. Credit score reflects the creditworthiness of the applicant and is based on several factors, for example, number of accounts open, total level of debt and repayment history etc. Lenders always check the credit score to evaluate their capability. applicant to repay the loan.

The number of credit scores ranges between 300-850, and the higher the score, the higher your chances of getting approved on your loan application. It also helps in determining your interest rate for the loan. The higher the credit score, the more you can negotiate with your lender for a lower interest rate.

Driver’s license

If you are applying for a car loan, you must have a valid driving license. It shows that you are legally allowed to drive before owning the car. If you have lost your license, or it has expired or been cancelled, your car loan may be cancelled. The lender needs to verify that you are a responsible driver before approving the car loan.

car type

The type of car you want to buy also determines your car loan eligibility. Since the value of a car depreciates over time, and each car has an estimated resale value based on its features and specifications, the resale value of the car also determines car loan eligibility. Hence, higher the resale value of the car, higher will be the car loan eligibility.

your employer’s reputation

It does not always affect one’s eligibility, but sometimes, the brand and company name helps in improving the car loan eligibility. An employee of a high-ranking company or Tier-1 firm may be able to get a higher loan amount than an employee of another company. Therefore, to get a higher loan amount sanctioned, it is important to have a higher income.

Whereas these are the basic checks that are done by a lender before approving a car loan. There are a few things an applicant should keep in mind before taking a car loan.

1) It is very important to compare interest rates, EMIs and other associated costs between lenders. Don’t just go with your first option. Shop around for competitive rates and choose the one that best suits you.

2) If you have a corpus left, it is advisable to pay as much as possible in the down payment. While most auto companies require only 10 percent of the entire vehicle cost as a down payment, your loan amount, as well as interest, will be greatly reduced if you pay 25-30 percent of the cost of the vehicle as your down payment. pay in.

3) Lenders usually offer a tenure of 1-7 years for car loan repayment. But the shorter your loan tenure, the less interest you will be charged.

This story was first published on mintjini and can be reached Here,