Car Loan in India

Gone are the days when owning a car was a luxury! Today, four-wheelers have become an inevitable necessity and are easily accessible to everyone.

The ability to buy your dream car without breaking the bank has not only added to the customer's purchasing power but also helped them live the dream. Besides, car loans have become more effortless than ever, as you no longer need to undergo rigorous paperwork and bank visits.

Below, we will explore the different aspects of a car loan. So continue reading as we walk you through the eligibility, differences, pros, and other aspects of car loans in the following sections.

Car Loan Eligibility Criteria

The basic eligibility requirements for getting a car loan are straightforward. Here are some key eligibility criteria that you must meet if you're seeking a car loan:

• The applicant should be a resident of India, be it in semi-urban, urban, or rural India.

• The applicant should be at least 18 years old or a maximum of 75 years old to apply for the loan.

• Have a minimum monthly income of Rs. 20,000.

• The applicant should be self-employed or a salaried individual with at least 2–3 years of working experience.

• The applicant must have had residential stability for at least one year.

Once you've crossed these eligibility factors off your list, it's time to move on to the documentation section of the loan process.

Car Loan Documents Required

Much like the eligibility criteria, you must possess a list of documents to ensure a seamless loan process for the car loan.

Here's an overview of the required documents to apply for a car loan:

• A valid identity proof: The applicant should provide valid ID proof such as an AADHAR or PAN card, a passport, or a driving licence, among other government-issued identity documents.

• Age proof: The applicant should be able to provide supporting age proof stating they are at least 18. It can be a ration card, driving license, school leaving certificate, or passport, among other government documents that mention their age.

• Valid address proof: Applicants must provide a government-issued document stating their residential address. You can present a PAN or AADHAR card, among other options.

• Income proof: If the applicant is a salaried individual, they should submit their last 3 month's bank statement, current 6 months' salary slips, Form-16, and updated ITR, among other documents.

  In contrast, self-employed individuals need to provide balance sheets, P&L accounts, balance sheets and updated ITR, besides the last three months' bank statement.

• Recent photographs: You must provide two copies of your current photo. The dimensions need to be either passport or stamp-size photographs.

Benefits of Car Loan

Thanks to the flexibility of loans in India, applicants generally receive numerous benefits while applying for a loan. Car loans in India gprovide typically several benefits, including:

• It gives you the flexibility to purchase a car, even when you don't have the money to buy it immediately.

• Most car loans finance the car's on-road price, loaning you nearly 90% of the purchase amount.

• Based on the bank, some providers will even provide 100% finance on the on-road price, meaning there are no down payments.

• Some banks are ready to finance applicants in crores, allowing them to buy luxury cars.

• Car loans in India often provide you with fixed-interest rate options. This helps you rest assured about the amount that needs to be repaid monthly.

• Many lenders offer loans based on credit score. The higher your credit score, the lower the rate of interest and the cheaper your car loan.

Note: You'll receive customised plans and special offers based on the bank with which you apply for the loan.

Car Loans vs. Personal Loans

We frequently use loans to finance the transaction when making a large purchase, like a car. Two of the largest and most popular types of finance that customers use are personal and auto loans.

Any reason is acceptable for a personal loan. In the case of personal loans, there are no obligations. But automobile buyers can especially need loans for cars. You can review each item's benefits and drawbacks to understand better.

Pros and Cons of Personal Loan

Pros:

• No restrictions around how you use the funds as the loan can be for any purpose.

• Personal loans offer flexibility in the payment structure.

Cons:

• Personal loans generally carry a higher interest rate as they are unsecured products.

• The lending criteria become more stringent when it comes to personal loans.

• Credit score plays a significant role in determining your eligibility for personal loans.

Pros and Cons of Car Loans

Pros:

• Car loans often have a lower interest rate.

• Getting a vehicle loan is simpler.

• Since the loan is secured, a person with a fair credit score may also qualify.

• The car itself serves as a guarantee for the loan.

Cons:

• A deposit payment will be asked from you.

• Once all payments have been completed, the automobile will no longer be yours but will instead be hypothecated to the bank.

• However, you must evaluate several loan packages before selecting the one that best meets your needs.

How do you calculate the EMI on a car loan?

The Equated Monthly Installments (EMIs) you will pay will depend on critical factors.

• The size of the loan

• The processing fees

• The interest rate that applies to the loan

• The tenure of the loan

While you're at it, remember higher the loan amount, the higher your EMI. Similarly, the shorter the loan tenure, the higher the amount paid as EMI.

Tips for Selecting the Best Car Loan

Here's a list of Do's and Don'ts to get the best car loan:

Dos

• Choose the car before applying for the loan, and make sure the cost of the car fits your budget.

• Select a loan with the required loan amount and the best interest rate.

• There are occasions when something that seems obvious contains a hidden element. Be mindful of any additional costs incurred with the auto loan.

Don'ts

• Do not submit applications to several banks if your first one is turned down. Rejection probabilities will increase.

• Applying to several banks may also hurt your credit score, so avoid doing so.

• The lender's loan might not have the lowest interest rate. Check out the alternatives.