All you need to know about car loans

Posted by neha sharma on April 29th, 2019

A car loan is a loan given by lenders so that the borrower can purchase a car. This type of finance is given for :

• New car
• Pre-owned car
• Loan against car

A car loan is the best way to get the car of your dreams. With the advent of digital banking, applying for a car loan is extremely easy, especially online.

Here is everything you need to know about car loans:

1. Secured loan:

In case of purchase of a car, the finance is directly given to the seller of the car. The car is hypothecated to the lender till the time the installments are paid off. Once the installments are paid off, the car loan hypothecation has to be removed and then the borrower’s name will appear on the car registration papers and car insurance papers.

2. Eligibility criteria:

Most lenders have set eligibility criteria when it comes to a car loan. These criteria are in regards to:

• Minimum income per month
• Minimum number of years stayed in the particular city
• Minimum number of years at job or minimum period the business is in operation

Lenders also allow a borrower to apply for a car loan jointly in case the monthly income conditions are not completely met.

3. Documents required:

The documents required for a car loan are fairly standard:

• Fully filled car loan application form
• Identity proof (Passport, Voter ID, Driving license, Aadhar card, PAN card)
• Address proof (Aadhar card, Passport, Voter ID, Driving License, Electricity bill, Telephone bill, Gas bill, Ration card)
• Income proofs (Bank statement, Form 16, Salary slips, Income Tax returns)
• Passport size photos depending on the lender

In case a car loan application is made online, the bank’s representatives will get in touch to get these documents collected.

4. EMI calculator:

There is no need to apply for a car loan and then find out the monthly installment amount. With digital banking, most lenders have a car loan calculator on their websites. A car loan calculator is a free of cost calculator that allows a person to find out the installment amount for the loan. It requires the loan amount, the rate of interest and the tenure to be put in and the loan calculator will automatically calculate the installment amount. Using a car loan calculator is extremely beneficial for borrowers because it can help in financial planning. It is also worthwhile to calculate the EMI amount under different tenures and rates of interest. A car loan calculator is simple to use but essential to help plan finances after taking a car loan.