How to get a car loan in India? : Here is the answer. Nowadays, you’ll see car a basic need for every family. The individuals who can not afford a new car, are buying second hand cars. Because owing a car has become a basic requirement in the city. When you are buying a new car you’re not only buying a car but also a satisfactory and a relaxing life because you don’t have to look for someone when you are going out. You have your own vehicle and you can go with utmost freed. Buying a new car is beneficial than buying an old car as you invest your money as well save it. While when you buy an old car, there will be some repairing required as more often used cars are damaged. So don’t worry even if you are going to buy a new car.
You need to take care of your budget, set price and choose a specific car. You can take loan from the suitable bank and can buy your vehicle easily. Earlier, buying a car was a milestone in one’s life as one had to shell out a huge amount of money, but now one can simply take a car loan. So here are the steps that you need to take care while buying a car and taking a car loan.
10 Steps to get a car loan in India
Here are the 10 steps to get a car loan in India mentioned below:
1. Choose a car
You need to do a little search for buying a car. It depends upon your needs and budget. If you have a joint family, you may need 5 or a 6 seater car and if you have nuclear family, you may need a 4 seater. Set your budget. If you’re going to buy a new car, your monthly payment should not be more than 15 percent of your take-home pay. And if you go for buying the used car the same should be applied. Used or second hand cars are less expensive. So if you are a learner you can buy used cars.
Buying a car is expensive but once you pay off your loan, you have the asset with you and can run it as long as you want. You can even lease your car. Leasing a car requires little money and you can drive luxury cars for less money. But when the lease period ends, you have no car. You need to buy it again. Choose car according to your needs and by setting the desired budget.
2. Check the eligibility
Check the eligibility criteria for taking loan. There are various different criteria for different categories. For salaries individuals, the individual must be 21 and should not exceed the age of 60 by the end of the period of loan. The individual must have 2 year experience in his field. The person should earn minimum of Rs 3 lakh including the income of his spouse. And the criteria for partnership firms, sole proprietor, private and public limited companies have different criteria.
Criteria for partnership is also same, the only difference is that it includes self employed individuals in the business. For sole proprietor, the individual must be in the business for 2 years. He should be a sole proprietor in the business of manufacturing, trading or services.
3. Decide loan amount
Decide the loan amount to be taken. Prefer public banks over private bank sector. Public banks provide lower rate of interest as compared to private banks. The car payment is divided into two parts, interest and the principal amount.
The loan amount depends upon your salary or the income you earn. You can present the amount either in monthly incomes or annually by paying 5 to 6 times more than the amount paid monthly.
4. Documents required
Car loan requires documents which are necessary to be submitted to the bank. These documents include:
- Identity proof as passport, driving license, pan card, Aadhar card etc.
- Address proof as passport, voter id etc.
- Age proof as 10th marksheet, birth certificate etc.
- Car documents.
- Income proof as 3 months salary slips, latest income tax return tax etc.
So these are some of the important documents which are required when taking a car loan.
5. Compare Interest Rate
Interest rate is the amount of interest due per period, which is to be lent or borrowed. While taking a car loan, you should compare the interest rates of different banks. Usually public banks offer lower interest rates. The lesser the interest rate, the lower amount of EMI you have to pay monthly.
Like HDFC bank provides interest rate 8.50%- 11.25%, so if you have loan of Rs 1 lakh for 7 years so you need to pay around Rs 1500- 1800 monthly. Low interest rates give you long term effect.
6. Enlist all the banks in the city
If you want to get a car loan, you need to enlist the banks in your city. Choose a bank which provides a lower rate of interest.
Don’t limit yourself in checking the financial institution from where you’ll take your loan. You need to check the loan and the amount they offer to you.
7. Check your credit
Keeping a track of your credit score is beneficial if you are going to get a car loan or any type of loan. Your credit score will help you in paying the amount of loan. A good credit score means that you have money in your pocket after taking the loan.
Your credit scores determines more than the amount of loan you get and the interest rates you pay. To grow your credit score, pay your bills on time and use your credit accounts on a regular basis.
8. Loan approval
When the banker finds all the necessary documents valid and the eligibility criteria fine with the client, the bank will go for loan approval within a short period. And you’ll be granted the loan for the desired time period.
You need to pay the EMI’s monthly or annually as signed by you.
9. Loan repayment
When you are approved by the bank, your lender will provide you the details about your repayment term. This will let you know how much to pay in a month and it will also list your interest rate.
The shorter the repayment term, the lower the interest rate and the monthly payment will also be lower.
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10. Loan disbursement
The loan amount is payed to the client by the bank after a certain period of time. The disbursal of loan is based on some formalities that you have to fulfill once the loan gets permitted. Avoid the extra payment of interest on the amount disbursed.
Now, I hope you have understood “How to get a car loan in India from bank?”.