Here is a quick guide if you are considering taking out a car loan.

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Get closer to your dream of owning a car and make it a reality. An auto loan is for those who want to buy a car but don’t have that kind of time or resources. Many financial institutions and banks provide loans with interest charges to someone who wants to own a car but cannot afford it. But it is not that simple ; you must meet certain eligibility parameters to be eligible for a car loan. Moreover, buying a car is not a child’s salary. Thus, obtaining a car loan requires a certain amount of knowledge and research.

So if you get a car loan for the first time, here is a quick guide that will make the whole process easier for you:

The basics of a car loan

Buying a car requires a lot of financial planning because it is expensive and is not a common purchase. It is understandable to need external financial support from banks and other credit institutions. These institutions can provide you with a large amount called a car loan to help pay for a car. Taking out a car loan means that you borrow the money to get a car for yourself, and you will pay off the entire amount with interest within a specified time period. . You can compare the auto loan interest rate among various organizations and financial institutions that offer such loans to get the one that suits you best.

Before applying for a car loan, you must ask yourself these two essential questions:

  • Are you buying a new car or a used car?
  • Which model do you want?
Depending on the price and car model chosen, the bank or financial institution approves the loan amount. Also, make sure the car is insured for security, then calculate the car loan interest rates to confirm your EMI.

Eligibility criteria for a car loan

You can get approved auto credit if you meet the following parameters:

  • The borrower must be in the age group of 18 to 75 years old
  • The borrower’s net monthly salary must be at least 10,000 INR
  • If you are self-employed, you must have 2-3 years of professional experience to obtain a car loan.
  • The borrower must be a resident Indian citizen to apply for a car loan from Indian banks and financial institutions.
  • You must have at least one year of residential stability to apply for an auto loan
  • A decent credit score and a reliable credit history

Documents required to obtain a car loan

If you meet the eligibility criteria for a car loan, the next step is to make sure and organize the correct paperwork to begin the process. The documents needed may vary from bank to bank, but you can organize these documents which are commonly requested by each institution:

  • Government authorized proof of identity – Your PAN card, driver’s license, AADHAR card, passport or any such government issued document may be considered proof of identity when applying for a car loan.
  • Proof of age – The borrower must be 18 years or older to apply for a car loan; thus, a document to prove age is essential. You can either submit your passport, driver’s license, ration card, graduation certificate, or any other government issued certificate showing your age.
  • Proof of Address- Valid proof of address, such as PAN card, AADHAR card, is required to prove that you are a citizen of the country.
  • Proof of income- Apart from these documents, if you are an employee, you must provide payslips for at least six months as well as your bank statement for the last three months. For self-employed workers, the requirement may vary. So, be sure to double check before applying for an auto loan.
  • Others – Signature verification and your recent photo are also required along with all of the above mentioned documents.

Some final points to consider before applying for a car loan

Before applying for an auto loan, make sure that you can afford to repay the amount within the allotted time. A loan, if not repaid on time, can cause a major financial crisis in the future. So plan the budget and then make the final decision. You don’t rush, sit down first and consider your IMEs and other financial obligations before you borrow money. Then choose a bank or institution that you want to go to. It would be best to turn to reliable banks such as Axis Bank that offer multiple auto credit interest rates for separate financial profiles.

Author: George Johnson

George is an accountant that specializes in debt solutions and financial consultancy. He is an expert when it comes to unsecured loans and their terms and conditions especially when it comes to APR. He plans on sharing more about his knowledge to help those who are planning to take on short-term loans.

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