A car has come a long way from being a luxury a few decades ago to a necessity nowadays. With a multitude of options available to suit all budgets and requirements and a growing number of financing options, it is easier than ever to purchase a car.
Yet, this is a big decision as a car is a major financial investment and is a long-term asset. While a number of lenders are offering loans at attractive terms, it can be confusing to find the most suitable loan product. We are here to help you make this decision and answer any questions you may have before you apply for a car loan.
How to get a car loan?
You can approach any financial institution that offers car loans or can fill an online form with your respective lender. A bank executive will approach you and will process your loan application as per your eligibility criteria and requirement.
Taking a car loan is very easy if you fulfill the eligibility criteria and provide valid documents.
What is the loan amount I can get?
Most financial institutions provide a car loan of up to 90% of the showroom value of the car and the rest of the amount has to be paid by the borrower. However, the final value of the loan varies from lender to lender and depends on the eligibility of the borrower.
What are the documents required to apply for a car loan?
The documents required to avail a car loan include the following:
Valid ID proof (PAN Card)
Valid residential address proof ( AADHAR Card, Electricity bill)
Last 6 months bank account statement
Valid income proofs
Last 3 years income tax return
Filled-in application form
Vehicle Pro-forma invoice or rate list
How long does the processing of a car loan take?
After the submission of documents, the processing of a car loan takes an average of 3-7 working days. It includes document verification, background verification, and risk assessment of the borrower before the disbursal of the loan amount.
Can my application for a car loan be rejected?
Yes, there are chances of rejection of your car loan application and it may happen due to the following circumstances:
If you do not have a satisfactory credit score
If your debt to income ratio is high
If you have not filled the car loan application form correctly
Or, invalid documents are submitted
What is the interest rate on car loans? Can you negotiate the interest rate?
The interest rate on a car loan is different for all financial institutions and is determined as per the borrower's credit profile. However, financial institutions follow MCLR based lending rate to fix the minimum interest rate on any loan. And, the final interest rate on any loan is a combination of MCLR + premium.
The premium is determined based on the borrower's credit score, employment status, financial status, loan amount and loan tenure. If you have a good credit score and healthy financials, you can negotiate the interest rate for your car loan with the lender.
What is the tenure for a car loan?
Most lenders offer a tenure of 1-5 years but may offer a longer tenure in certain cases. You can opt for a high EMI and a shorter tenure or choose to pay lower EMIs for a longer tenure depending on how you choose to manage your finances. This holds true for both new and used cars.
Can I negotiate the terms of the car loan?
Yes, the loan term is negotiable and if you already have a transaction history with the financial institution, you can ask for better terms. On the other hand, if you are approaching a new lender, make sure you have a good credit score, strong financials, and necessary documentation.
How much EMI will I have to pay when I take a car loan? Is prepayment of the loan permissible?
The EMI of your car loan depends on the amount and tenure of your car loan. You can use the EMI calculator to get an estimate of the EMI amount for different loan tenures.
Yes, you can pre-pay the entire loan amount after 6 months to 1 year, depending on the terms of the loan. However, before signing the loan document, always check the prepayment clause mentioned by the lender.
Can I get a used car loan?
Yes, many financial institutions including Hero FinCorp offer second-hand car finance. However, the terms of the loan differ from those of a car loan availed for a new car. Factors affecting loan terms are:
Car model type (if it is still in production)
Borrower's credit profile
When financing your car purchase, thoroughly research all your options, and find a lender and loan product that suits your needs. Make sure you understand the process and all the terms and conditions of the loan product before you apply. Also, ensure you submit all necessary documents in order to get your loan approved without any hassles.