Introduction
Buying a car is now easier than ever. You must have already planned and asked around in your friends and family circles about the best options suitable for your needs, but if you haven’t, don’t worry. There are a lot of marketplaces, dealers, banks, and other private institutions providing the needed work and research before you find your best options out there at affordable interest rates and EMIs. Applying for a car loan is no longer a hassle. The hassle-free and online options allow investors to enjoy their benefits worth their investment.
However, all benefits and advantages aside, an understanding of an auto loan is important to negotiate prices and get the best deals possible.
In this blog, we will discuss everything you need to know about applying for a car loan.
Before Applying For A Car Loan
Applying for a car loan, either pre-approved or not, is an essential step in the car buying process. Without a loan, the burden of large investments fall on your shoulder along with bundled taxes haunting your nightmares.
#1 Check Your Eligibility
Eligibility is the most important key factor when availing of a loan from any public or private institution. Although the requirements differ from bank to bank or lender to lender, there are a few standard criteria to be fulfilled for salaried or self-employed individuals to benefit from a loan.
Eligibility Criteria For Salaried:
- Minimum Age: 21 years
- Maximum Age: 60 – 65 years at Loan Maturity
- Income Requirement: Minimum Rs.10,000 p.m and above.
- Employment: Minimum 2 years and 1 year with Current Employer
- Healthy credit history and employment stability provide added benefits.
All Indian residents are eligible to apply.
Note: Terms and conditions may vary for NRI residents based on the lender.
Eligibility Criteria For Self-employed:
- Minimum Age: 21 years
- Maximum Age: 60 – 65 years at Loan Maturity
- Income Requirement: Minimum stable income of Rs. 2,00,000 p.a.
- Business: Minimum 2 years in Current business is beneficial
- Healthy ITR history is highly attractive.
All Indian residents are eligible to apply.
Note: Terms and conditions may vary for NRI residents based on the lender.
#2 Verify Your Documents
The eligible candidates are advised to keep a track of their documents beforehand to avoid hassle at the time of application. It is a security protocol and a mandatory process for any type of lender. They may require a few standard and specific documents to verify your credentials before sanctioning a loan.
Documents Required For Salaried:
- KYC Documents (Proof of identity and address)
- History of current employment (Employment proof)
- Past 3 month’s salary slip
- Latest 6 months bank statement
- Form 16 of the last 2 years
Documents Required For Self-employed:
- KYC Documents (Proof of identity and address)
- ITR for the last 2 years with computation of income bank statement
- Current account statement of last 1 year (Preferably)
- Savings account statement for last 6-month
- Business and residence ownership proof (Any Registration Proof)
Note: The requirements may vary from lender to lender, contact us at Blue Carz for more details.
Checkout our checklist guide to prepare necessary documents for the loan beforehand.
#3 Check Your Credit History
Credit history may not be everything that a lender looks for, but it is everything when you have an excellent credit history. With a great credit history comes a lesser responsibility. You heard that right. People who have a credit score of 650 or above are at a high advantage of benefiting from exciting and attractive deals that banks or institutions may offer. Such as low-interest rates, low EMIs, and high loan sanctions. So it is highly advisable to check your credit report once a year to be at an advantage.
Even if you do not have one or have a poor CIBIL/credit score, you are still offered a loan under different circumstances. Such as, a guarantor may benefit your credibility or professional stability. Either way, you will still get a loan but the lender may ask for additional documents or proof from you depending on your credit history.
There are several tools to check your credit score online or give us a call at Blue carz to talk to our representatives today and get a free consultation. Applying for a car loan need not be a burden anymore.
#4 Do The Market Research
Before applying for a car loan, you need to know which lender you will benefit from the most as you dive into the pool of financiers. Each lender has a different set of rules and requirements with varying interest rates and EMIs. Knowing from scratch about your options in the market will benefit you to get the best offer on your loan.
Whether you have a personal favorite or are yet to find your lender, there are several marketplaces, including one of our own, providing comparisons of the top lenders (Banks, NBFCs, Private financiers) from all over India available in the competition. You just need to know details about your car make, model, and the loan amount you are looking to avail on your car, and the rest is upon us.
#5 Prepare For A Down Payment
A pre-approved auto loan is a loan you can get before purchasing a car. And it is always a good idea to get pre-approved for an auto loan before you start shopping because once you have your loan amount you can choose a car to fit your budget. Although, you could always change the decision on the pre-committed vehicle by contacting the lender if you change your mind after a test drive.
Once you’ve committed to your budget, the down payments show the lender your commitment and reliability, also reducing your depreciation losses when you buy a new car. I. e a down payment of 20% or more will get you a lower interest rate on an auto loan and a borrower with a higher down payment makes an impression on the lender even if he/she has a poor CIBIL score.
Higher down payment = Lower LTV = Better Interest rates = Lower EMIs
Applying For A Car Loan With Poor Credit
Car Loan: Title Loan Vs Registration Loans
Car Title Loans Are For Vehicle Owners
Car title loans work like gold loans where the borrower owns a paid off vehicle. The owned vehicle can be put as an asset or collateral to obtain the loan on your car. However, the bank will hold the ownership of the car until the loan is repaid in full with interest. This does not mean the bank will cease your vehicle, even more, you can still drive your car. The bank will hold a co-ownership and will only take an action if the loan amount sanctioned on the car title loan is not paid due.
Title loans allow you to take higher loans of upto 50% of your car market value, like the gold loans. This secured loan allow you to be eligible for a higher LTV with poor credit.
Registration Loans Come With Greater Interest
Registration loans on the other hand are a risk move for lenders, therefore they slam higher interest rates on these loansas they are not secured by collateral. Therefore are considered more loss for borrowers and lenders alike to consider this type of loan.
Benefits Of Applying For A Car Loan With Auto Title Loan
| Speed | 30min – 24hours process | can take weeks to get a bank loan | Walk out with a locally drawn check |
| Convinience | Online process | Doorstep services | Keep your car |
| Easy Paperwork | Minimal documentation | 100% paperless process | Easy eligbility |
| Simplicity | All profile acceptance | Anyone with car can get a loan | No background check |
| Cash In Hurry | Emergency funds with short-term financing options | Bank loans take 6 month lock-in period | Quick disbursals |
| Easy Repayment | Personalized payment plans | Pay online or offline | 24/7 services available |
20-3-8 Rule
20-3-8 rule is a popular advice statement in the world of purchasing a car. When you are applying for a car loan, it is beneficial to follow the 20-3-8 rule.
When applying for a car loan, 20-3-8 Rule Suggests
- 20% down payment on your car
- 3 years or less repayment tenure
- Car payment less than 8% of your income
Bonus Lesson: Applying For A Car Loan At Best Interest Rate
The Bottom Line
Applying for a car loan is a straightforward process. However, lenders may want to work with those customers who they can rely on and who meet their repayment capabilities, hence you might want to be at an advantage with a good CIBIL score and employment stability.
Even with a financial cut-down, a person may still receive a loan. But make sure your lender is looped in with your capabilities and requirements to form a transparent relationship. Although they may not force you into submitting unwanted documents, it is advisable to have a middleman or a marketplace bringing together all lenders to compare your prices and deals at your convenience.
Blue Carz is India’s largest marketplace for all financial institutions supporting automobile loans. With over 1 Lakh satisfied customers across India, and 20+ financial partners across the lending ecosystem; we are a go-to destination for all your car loan needs. Whether you are applying for a car loan or need a pre-approved loan to buy one, we offer you the best loan options with top offers like cashback, top-up financing, refinancing, and extended warranties, so you can get the right car loan, at the right price, for the best offer.
Get discounts on your loan with our leading partners, HDFC, SBI, Kotak, Axis, ICICI, and more! Grab your benefits today.
