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Easy Way To Apply For Car Loan In India

Car Loan

Owning a car was once a luxury. But in today’s economically evolving world, cars are needed and convenient to move from one corner of an ever-expanding city to another.

Everyone may not have enough cash to buy a car in one lump sum, but many lenders can help you realize your dream of buying a car through a car loan. I can do it.

Applying for a car loan is hassle-free, easy, and paperless. With just a few clicks, you can submit your car loan application form online.

Today, almost all banks offer mortgages at attractive interest rates. Based on affordability, it is now very easy to borrow a car loan and pay EMI without actually biting a person’s finances.

How To Apply For a Car Loan?

Car loans are available in a variety of modes.

Apply For Car Loan
  • Access the bank branch directly
  • Apply online from your bank’s internet / mobile banking portal.
  • Raise money through a car dealer.
  • The selected bank collects the documents, initiates the application process including confirmation of CIBIL score, asset (vehicle) value, eligibility conditions, etc., and decides the loan application based on the evaluation result.

Types Of Car Loan Interest Rates

Mortgage rates can be fixed or variable. A fixed interest rate is an interest rate that is constant throughout the loan holding period. Factors such as market volatility do not affect fixed rates. Floating interest rates, on the other hand, are a type of interest rate that continues to change as financial market trends change.

There are Two Types of Car Loan Interest Rates:

Fixed Interest Rate

Borrowers generally see fixed rates when financial markets are not functioning very well. You can ideally fix the interest rate on your mortgage at your convenience.

If you feel that interest rates may rise quickly, or that financial markets may not fall below a certain level, it is wise to choose a fixed rate.

Floating Interest Rate

These interest rates are cheaper than fixed rates. Floating interest rates change as market trends change. Floating rates are affected if the base rate or MCLR changes. Therefore, rising interest rates can increase the EMI of car loans, which can be a daunting task.

However, if the price goes down, you can enjoy your savings in the long run. The main drawback associated with floating rates is that they cannot effectively stick to an individual’s financial plans because interest rates can change from time to time.

The difference between the two rates is explained in the table below:

Fixed interest rateFloating interest rate
You can easily prepare your budget with these ratesBudgets are difficult to maintain as prices continue to change
High-interest ratesLow-interest rates
Low riskHigh risk
EMI remains constantEMI changes in response to changes in MCLR
Provides security to the borrowerProviding savings to the borrower
Suitable for short-term loan holding period (3 to 10 years)Suitable for long-term loan periods (20-30 years)
car loan

Comparison Of Car Loan Interest Rates For All Banks

Bank name Interest rates on car loans
State Bank of India7.20% onwards
Canara Bank7.30% onwards
HDFC Bank7.95% onwards
Jammu Kashmir BankRLLR + 0.75% onwards (Floating)
RLLR + 1.50% onwards (fixed)
Karur Vysya Bank7.80% onwards
IDBI Bank7.35% onwards
Axis Bank7.45% onwards
South Indian BankRepo Rate + 5.10%
Federal Bank of India8.50% onwards
Union Bank of India7.40% onwards
Tamilnad Mercantile Bank8.25% onwards
Karnataka Bank8.05% onwards
Punjab National Bank6.65% onwards
Indian Overseas Bank7.55% onwards
car loan interest rates

Factors Influencing Car Loans

Credit Score

If you have a credit score of 750 or higher, your lender is more likely to offer you a car loan at a lower interest rate.

That’s because a good credit score gives lenders an indication that lending to you is less risky because you’ve been good at past payments as indicated by your score.

Factors Influencing Car Loans

Your creditor will ask you about your creditworthiness to understand your creditworthiness. Based on its meaning and score, the lender draws the amount of the loan and the associated conditions.

So if you want a low-interest rate on your car loan, it’s a good idea to keep your credit score at a good level. If you have a good credit score, you can also receive extra benefits like fast approvals, pre-approved offers, and more.

Repayment Period

The repayment period selected for a car loan affects interest rates. If you choose a longer term, the EMI will be lower, but you will pay a higher interest rate over the entire term of the loan.

On the other hand, if you choose short-term, the EMI will be higher, but you will be able to clear the loan faster.

Lenders usually charge a lower interest rate on a car loan if they choose a shorter period just because the loan is settled sooner.

Debt to Income Ratio

Lenders will evaluate your income and the commitments you need to meet at the end of the month to see if your new car loan and its EMI fit your budget.

If your income is higher, you can benefit from a lower interest rate because a higher income indicates a greater ability to repay.

The lender will take a new loan and determine your ability to support it in terms of the debt-to-revenue (DTI) ratio. If your DTI score is high, your loan will be low, regardless of your income. There is a risk that the terms of the loan will be stricter.

Loan Amount

The amount of Car loan you take affects the interest rates charged on your Car loan. If you choose a higher loan amount, you can get a lower interest rate and vice versa. However, this depends on the lender.

Down Payment

All car loans come with specific coverage. The margin here is the amount of money or the percentage of the price of a road car that you have to pay out of pocket. Although there are 100% funded credit facilities on the market, they are subject to certain conditions.

It’s always beneficial to save some money and use it as down payment so you can take out less credit and pay less interest to the bank, reducing the total cost of using your car. Lenders also prefer to pay a certain down payment from the end.

This gives creditors a kind of guarantee that you can plan and manage your money well and will not suddenly escape repayment.

Lender Relationships

Lenders who have a good relationship with payments and other transactions can offer car loans at low-interest rates. So, before you look for other lenders for car loans, take a look at the interest rates that lenders offer.

Age of Vehicle

In the case of a used car loan, the age of the car is very important in determining the interest rate and is the deciding factor in accepting or rejecting the loan application.

Car Loan Eligibility Criteria

There are certain eligibility requirements to be met for a car loan and you need to make sure that you know them correctly. Let’s look at the factors that determine whether you are eligible to buy a car:

Age

Persons under the age of 21 or over the age of 65 cannot apply for a car loan. The car loan must also be repaid before the applicant reaches the age of 65. Therefore, your age affects whether you are eligible for a loan and the amount of the loan.

Income Level

Your income determines your ability to repay a loan. This is an important factor in determining loan eligibility. You will need to show proof of your income when you apply. If your income does not meet the eligibility criteria, you can also involve co-applicants whose income is added to the eligibility calculation.

Credit Score

A credit score is an indicator of an applicant’s creditworthiness. A high credit score indicates better credit, which means you have a higher chance of getting a loan.

Debts

Any outstanding debt will affect your eligibility as these debts require your income. We recommend that you repay all outstanding debts before applying for a new loan.

DetailsSalariedSelf-Employed
Age21-60 years18-65 years
Loan-to-value ratioup to100%up to100%
Loan Tenureup to 7 yearsup to 7 years
Annual Income₹ 25000Minimum turnover of ₹40 Lakh
Credit Score700700
eligibility requirements

How To Improve Your Eligibility For A Car Loan?

If you find that you don’t qualify for the loan you want, you can improve your eligibility by following any or all of the steps below:

Increase Your Credit Score

Having a good credit score can significantly increase your eligibility for a car loan. You can improve your credit score by paying off existing loans, closing existing credit or debit cards, and paying off any overdrafts in your account.

Pay Off Existing Debts

Pay off any existing loans or debts. This will improve your debt-to-income ratio and increase your eligibility for a loan.

Bring In Co-Applicants

Despite best efforts, if you still do not qualify, you can bring in a co-applicant whose income will also be considered for eligibility. The requirements for co-applicants are generally the same as those for principal applicants.

Steps To Take Before Applying For a Car Loan

Before applying for a Car loan at a bank, we recommend that you keep the following in mind:

Do Your Research

Examine the fees, fees and other terms offered by multiple banks and lenders to understand the market and select the lender to submit your mortgage application.

Small differences in interest rates and other conditions can make a big difference over time.

Similarly, get quotes from various dealers for your desired vehicle. In addition, some of these dealers may be affiliated with banks and offer the same vehicles at discounted prices. Approaching multiple dealers can help you find and get the best deal for your car.

Provide Complete Documentation

Once you have decided on a lender, you will approach their website, go through it, and have the documents you need to submit with your loan application. Please check the validity of your driver’s license and other documents and renew it when the expiration date is approaching.

Do not give lenders the opportunity to defer/disapprove a loan just because the documents do not meet the standards.

Choose Your Repayment Period Wisely

Use Car Loan EMI Calculator to calculate the EMI you need to pay for a specific loan amount and repayment period. With this tool, you can understand how long your loan is comfortable and what EMI you can handle each month.

Car Loan EMI Calculator
Car Loan EMI Calculator

With this homework, you will confidently negotiate loan repayment terms and EMI issues with your bank representative. Remember to consider the total cost of owning a car when you are in it.

From an EMI perspective, longer tenures may seem appealing, but paying interest costs even more.

Consider The Total Cost Of Owning A Car

As mentioned earlier, the total cost of ownership is an important factor when buying a car. However, many people cannot see the whole picture.

To calculate the total cost of owning a car, you need to consider the applicable charges and charges, the nature of the charges and charges, interest rates, down payments, and the total amount you will pay to the bank from the beginning.

Loans until you have fully paid off your expenses, car insurance premiums, taxes you pay, and many other expenses.

Different banks may have different fees and paperwork fees. Some lenders impose a penalty if they want to close their loan account well before the loan holding period. All of these factors play an important role in choosing a lender.

Check Out The Offers And Discounts

Most lenders offer festival offers and discounts at Indian festivals like Dussehra and Diwali. There can be many other times when lenders or car dealers come up with discounts and offers.

Occasionally, 0% funding schemes may exist. Check out such deals to save a few pennies.

Car Loan Document Required

When applying for a mortgage, you must provide a package of documents so that the bank can review the information and approve the loan request. Documents primarily include but are not limited to, identification, address proof, age proof, income proof, bank statement, and quote invoice.

Car Loan Document Required
Car Loan Document Required

Identity Proof

  • Aadhaar card
  • PAN card
  • Driving License
  • Passport
  • Voter ID

Address Proof

  • Aadhaar card
  • Passport
  • Driving License
  • Voter ID
  • Family card (ration card)
  • Utility bill (Electricity, water, or telephone)
  • Life insurance policy

Proof of Income (Salaried Professionals)

  • Salary slips
  • Form 16
  • Income tax return document

Proof of Income (Self-Employed Individuals)

  • Income tax returns for up to 2 years
  • Audited balance sheet
  • Profit-loss statement

Business Ownership Proof (Only in case of Self-Employed Individuals)

To prove that your business is running, you can provide:

  • Office address proof
  • Maintenance fee
  • Public fees

In addition, the applicant must also provide a copy of the business registration license.

Age Proof

  • Birth certificate
  • School transfer certificate
  • Std. 10 mark sheet
  • Aadhaar card

Bank Statement

3-6 month bank statement

Signature Verification Certificate

The bank has a separate form for applicants to fill out with a signature

Proforma Invoice

This document contains the price quoted by a dealer for the car selected by the applicant. The amount of the loan is determined by the price of the car.

Features and Benefits of Car Loan

Features and Benefits of Car Loan:

  • Get financing to buy new and used cars.
  • Financing can reach up to 85-90% of the car’s road price. Some banks offer up to 100% financing from the road price of the vehicle under certain conditions.
  • The term of the loan can range from one year to seven years.
  • The amount of the loan can be three times the applicant’s annual income.
  • Some lenders offer instant financing options for cars.
  • You can get additional discounts and offers if you decide to buy a car from the dealer or manufacturer with whom the bank has a deal.
  • A car purchased through financing will be held as collateral until the loan is repaid.
  • The most commonly followed repayment structure for a car loan is the monthly installment (EMI).

Conclusion

Car loans have been one of India’s most popular financial products for 10 years, and the trend to take out car loans has increased dramatically.

conclusion

Many Indian financial companies and private banks are focusing on the car loan sector to generate revenue in the form of interest. Car loan companies are working with car loan providers to develop a number of customized offers to attract customers to make car loans available at different interest rates.

Depending on the loan amount and other important parameters, civil servants may be less interested. Interest rates on car loans depend on many factors, including the amount of the loan, the type of vehicle, and the credit record of the borrower.

Frequently Asked Questions(FAQs)

Does your car loan include RTO and insurance?

The car loan does not cover the insurance or registration fee to be paid when purchasing a car. Compulsory car insurance must be taken out separately and is not covered by the car loan, so all costs related to vehicle registration will be borne by you.

Is a 72 month car loan bad?

Usually yes, a 72 month car loan is bad. Obtaining a 72-month mortgage puts you in a vulnerable position as you are more likely to cancel your mortgage. If possible, avoid 72-month car loans. This can mean buying a car that is cheaper than expected.

Do Car Loans Save Income Tax?

Yes, if you are a self-employed professional or business owner and use your car for business purposes, a car loan can help you save taxes. However, office workers cannot claim tax credits for interest repayments on car loans like mortgages. The reason behind this is that cars are considered luxury goods.

What are the benefits of car loans?

You build fairness in the car.
Once you’ve paid your loan, you don’t have to pay anymore.
Once payment is complete, you can sell your vehicle or replace it with a new one.
There is no limit to the number of miles you can drive.