If you are reading this article, you are set to drive home a brand new car in the near future. Owning a car these days is no more a luxury, rather it has become a necessity. With growing traffic and busy lifestyle, it becomes critically important to own a vehicle for daily commuting purposes. However, the fact cannot be denied that buying a car is one of the biggest investments in a person’s lifetime after registering a house under his/ her name. For an average Indian household, buying a car solely on savings is a distant dream. So, if you too are worried about finances for buying a car, a car loan can help you achieve your aspiration.
Indian economy is on the rise and so is the automobile industry. With RBI slashing down interest rates on all types of loan, taking a car loan has become an affordable exercise. In fact, car loan interest rates have turned to their six years low. This steep cut in car loan interest rates has resulted in installments per lakh come down. Hence, 2017 appears to be the perfect year with the massive interest rate cut down. However, you are required to do some serious homework about various lenders’ interest rates and their terms and conditions. Here is a checklist that may guide you throughout the car loan application and approval process-
• Pick the right lender
There are many car loan lenders right from the nationalized banks to the private banks, Non-Banking Financial Corporation (NBFC), private lenders etc. operating in the market. Check for a bank or financial institution that offers the lowest car loan interest rate and easy terms and conditions. Also, don’t forget to check out their hidden charges, like processing fee and other taxes. Freeze the lender that offers a simple overall process, quick disbursal of the loan, and require minimal documents. According to Rohit, 26, IT professional who recently took a car loan from Tata Capital, “And the best part with Tata Capital was the quick disbursal of my loan amount and hassle free process. The required documents were minimal and easy to arrange. The documents required for applying a used car loan include ID proof, address proof, signature verification proof, photograph, ITR/salary slips, Form 16, and bank statement for last three months.”
• Check your CIBIL score
Though it is unlikely that your car loan application may be rejected on a low CIBIL score as car loan is a secure credit for lenders. A good CIBIL score will give you an upper hand in the discussion with your lender and you can strongly negotiate on the interest rate.
• Loan Tenure
In India, car loans are normally sanctioned for a maximum period of five years. You should always try to prepay the loan amount as it will save you from paying large chunks of money as interest.
• EMI Structure
Check with your lender whether they provide convenient options for customizing EMIs. For example, Tata Capital offers a unique and innovative repayment methods like step up (EMIs increase gradually), step down (EMIs decrease gradually), Bullet payment (prepayment in parts, periodic payments), and ballooning option (lower EMIs with bigger payment in last EMI).
You can do a quick research on the internet about various options of car loans available and go with the one that perfectly suits your needs and requirements. Many financial institutions provide instant e-quote on the internet to give you an idea of the loan tenure and proposed sanctioned about based upon your income and other details that you will be required to provide to their portal.