A car loan is a particular bank or financial lending scheme to help customers purchase a car without the necessity to give up the entire on-road price upfront, whether it is a need or the satisfaction of a desire. Before you make the decision on taking a loan, we look at what you must consider and explicitly look at the interest rates first. That being said, although a car is a devaluing investment that gives you no tax advantage, you need to consider your decision carefully before going forward, either on principal repayment or interest payment. Cheaper interest rates and offerings do not indicate that, no matter how attractive they look, you can go ahead with the investment. Your overall EMIs does not surpass 45% of your take-home salary while buying one only if you can comfortably afford it.
Car Loan Interest Rates
|Banks||ROI per annum in %|
|Punjab & Sind Bank||7.10|
|Central Bank of India||7.25|
|Punjab National Bank||7.30|
|Bank of Baroda||7.35|
|Union Bank of India||7.40|
|Bank of India||7.45|
|Bank of Maharashtra||7.50|
|Indian Overseas Bank||7.55|
Eligibility required to avail a car loan
One must meet with the below-given eligibility criteria which may differ from bank to bank in order to apply for a car loan:
- An individual must have an age limit between 25 and 75 years of old
- An individual must have a minimum income of Rs 20,000
- A minimum of 1 year of employment
- Serving for a government establishment or a private corporation must be working or self-employed.
Documents required to apply for a car loan
In order to apply for a car loan, one must have the following documents ready:
Identity proof: Aadhaar, Passport, Driving Licence, Driving licence, Voter ID Card, PAN Card.
Address proof: Aadhaar, Valid passport, driving licence, utility bills of the last 3 months.
Proof of income: Form 16, salary proof for the last 3 months, the latest IT returns, bank statement of the last 6 months.
Tips to get your car loan approved faster
It is best if you apply for a pre-approved loan if you want to receive capital to purchase the new or used car that you have been targeting for a while. You can take the following tips into consideration if you want to get your loan application approved faster.
- In terms of credit rating, you can review your credit report to validate your status. A rating of 750 or more can earn you a cheaper rate of interest. The interest rate for a 650 to 750 score will, therefore, be marginally higher. Your request will be denied if you have mistakes in your report, or have a very poor score.
- You need a minimum monthly pre-tax income and a reasonable debt-to-income ratio in order to take advantage of a loan to buy your dream car. Although increasing one's salary is typically not feasible, by clearing off all your outstanding credit card debts, you can increase your debt-to-income ratio.
- You should always settle your bills on time to build a positive credit profile, and it is recommended that you must pay your debts at least 6 months prior to applying for the loan. If you settle the bills on time, it guarantees the provider that the Equated Monthly Installments (EMIs) will still be repaid on time. This will help you get a loan quickly, in addition.
- In the sector, there are many ways available from which you can secure a loan to buy your new or used car. In an attempt to discover the one that suits your desires, you can search the car loan interest rates of numerous banks and car lending companies.
- You will reduce the cost you will have to repay by paying a higher amount as a down payment in order to fit the price of the vehicle you have purchased. You will be in a stronger place to repay the loan faster if you finance a lower amount, as a bigger loan amount implies smaller EMIs or smaller loan tenure.
- An applicant's repayment potential has a significant effect on the acceptance of a loan he or she has requested. You must make sure that you pick a plan that you can afford when you agree to get a loan to buy the car that you have always desired. If you are currently paying EMIs for other loans you have taken advantage of, you can confirm that the EMI for the car loan you chose will still be charged.
- You may not be feasible for a car loan that has low monthly EMIs but consisting of a longer term. You should still aim to look for a package that holds the lowest interest rate and the lowest possible term of the loan before finalizing. Stop being fooled into a risky payment scenario by making sure the terms of the loan are definitive.
- The principal concern of banks and NBFCs while providing a loan is not to suffer any risks. Consequently, when sanctioning a car loan, having full-cover insurance is a prerequisite for certain companies as it tends them reclaim the balance debt if there is an event that the lender is at risk.