CRED 23 – How to Apply for a Car Loan in 5 Easy Steps

This article will discuss five easy steps through which one can apply for a car loan. But before thinking about taking a loan, check whether you are eligible for a car loan or not. Some conditions need to be met to become eligible for a car loan. They are 

  • Minimum age – 18 Yrs
  • Maximum age – 75 Yrs
  • Minimum Salary – Rs.10000 per month
  • Experience – Minimum 3 years in business or 2 years in current profession
  • Residence stability – Minimum 1 Year stay at current address.

There are many free car loan eligibility calculators online and loan eligibility changes from bank to bank.

Know about Credit Score

Credit score plays a significant role in the approval of any loan. A good credit score can drastically increase the chances of loan approval when compared to a bad one. If you research the credit score, you can get an opportunity to clear any errors regarding your credit score, which will positively impact the score. If you found out about your low credit score, researching it gives a chance to improve before applying for a car loan. This also helps you know what kind of lenders to deal with and what interest rates.

Know about your budget

Applying for a loan amount which you cannot repay easily is not good. This can affect your financials badly and can push you into a debt crisis. So, before applying for a car loan, do some research about the budget.

Find yourself the answers for three questions: What is the amount that I can pay comfortably every month without affecting livelihood? How much amount can I pay upfront? What is the length of the loan EMI? The answers to these questions help you to ensure whether the loan amount is within your budget or not? If possible use EMI calculators for estimates.

Do Some research about market interest rates.

There are many banks and financial institutions out there which are offering car loans at various interest rates. Car loans became a competitive business. If one bank offers a 10% interest rate, there would be an offering at 9.95%. So, choose the one offering loans at the least possible interest rate.

Submit the required documents

While applying for a car loan, different kinds of documents are required. Some of them are the Income statement, address proof, identification documents, bank statements, ITR returns etc.,

The documents that are required changes based on what kind of individual you are. Documents required for a salaried individual are different from self-employed one. This would be a tedious step if not prepared earlier.

Submit car loan application

After completing all the above steps, the final one would be submitting your car loan application. In this step, the lender needs to fill a form with their bank or finance company and provide them with required personal information. During this step, the financial experts of that particular bank talk about the eligible loan amount and interest rates at which they are offering.

If you choose for a more extended EMI period, then your monthly EMI amount would be smaller. If you choose for a short loan period, then your monthly EMI amount would be higher. But it is always recommended to choose a shorter loan period or else you can end up paying high interest. A car loan EMI calculator will give you a clear view of which loan scheme to choose.

After submitting the car loan application, it takes around two days to approve and disburse the loan amount.