Looking to buy an automobile but funds failing you? An auto loan can be the best response to your situation. Any reliable lender will fund your auto purchase easily, quickly and cost-effectively. That said, auto loaning should be approached with some precaution and forethought from the very get-go. Any error in judgment can lead to denials, delays, hassles and extra spending.
Like many in your situation, you must be weighed down by certain doubts that need to be cleared before you start loan shopping. Let’s clear them all, one at a time.
Am I eligible?
The lenders sanction the loan only if the borrower is in a position to repay it within a specified timeframe. That’s why they have eligibility criteria in place. You have to fulfill it or else they’ll deny you the auto loan. So, being doubtful of your auto finance eligibility is normal. However, you can breathe easy, as all top banks and NBFCs have lenient eligibility criteria. Specifications may vary, but there’s a lot of overlap across eligibility criteria set forth by different lenders.
Also Read: Chicken Bone Broth Recipe
Usually, any Indian citizen, salaried or self-employed with a specified monthly income is eligible. The income requirements are lender-specific. But most lenders readily offer loan to any salaried person earning Rs 15000 monthly and any self-employed person with an annual income of Rs 150000. Plus, he/she should be at least 21 years old when applying and not more than 65 years when the loan term expires. If you fulfill these conditions, an auto loan can come your way.
Will I be able to meet the documentation requirements?
No denying the fact that you need to furnish certain documents to prove your identity and repayment ability. But the documentation requirements are not as tedious as many believe them to be. Just gather the following documents and ease your way to an auto loan.
- Address Proof: Any one of the following: Voters ID card, Aadhaar Card, Driving License, Passport, Ration Card, LIC Policy, Electricity, Landline Telephone or Gas bill paid lately.
- Identity Proof: Any one of the following: Aadhaar Card, Passport, Driving License, Voters ID Card, and PAN Card.
- Income Proof: Any one of the following: Bank Statement, ITR, Salary Slips, and Form 16.
- Asset Proof: The latest tax receipt of land or building house.
- Photograph: A recent passport size photograph
Will the interest rate be affordable?
In auto finance, the interest rate determines the overall cost of borrowing and EMI outflow. Let go off the doubt that these loans attract hefty interest rates. In fact, certain NBFCs offer interest rates as low as 9.5 per cent per annum to help you achieve freedom of mobility.
The interest rates are customer-specific and negotiable. That means the rate you get may be different from what someone else gets. Lenders often offer slashed rates to their existing customers, those with a decent credit history, and those who can negotiate well.
What’s the ideal loan amount for me?
Different lenders cover the cost of your vehicle differently. While most sanction 80 to 90 per cent of the automobile’s showroom price as a loan, some may cover the entire cost. Now you have every reason to doubt whether to pay some amount from your pocket or finance the vehicle fully.
It depends on your income. If you have spare funds, making down payment yourself makes sense. This way you limit your loan amount, and hence reduce the applicable interest rates and pressure on EMIs. But in case you lack funds, opting for 100% financing is the only way out.
Can I prepay the loan?
Pre-closure of the auto loan is a profitable proposition for borrowers. They are relieved from paying interest and EMIs that strain their monthly budget and boost the cost of borrowing. Almost all lenders allow for prepayment of the loan prior to the tenor. However, some may charge hefty pre-closure fees. It’s in your best interest to enquire about it well in advance.
Are any other charges involved?
Yes, plenty of them. A typical auto loan comes with additional processing and documentation fees, varying from lender to lender. Many even compensate for their low-interest rates with significant processing and documentation fees. Plus, you may be paying foreclosure, late fees and other penalties if the conditions of the loan are not met. So, it’s advisable to read the loan T&C thoroughly before signing up. Don’t skip the finer print, as the devil is often in the details.