Banks typically provide auto loans up to 90% of the cost of new cars and 85% of used cars. The car is pledged as collateral to the lender. The loan is generally between 12 and 84 months, and the repayment depends on your monthly income and capacity to repay. Lenders set interest rates depending on the type of car and loan amount. For auto loans, interest rates are often fixed.
Unlike residential loans, the approval process for authorized used car dealers near me is comparatively more straightforward. However, before approving your loan application, lenders will consider a few fundamental factors.
- CIBIL Score and Report: Lenders consider both the state of your credit at the time of application and the consistency of your past payment history. Before making a final decision on your loan application, lenders consider your CIBIL Score and credit background. The likelihood of your loan being approved rises as your CIBIL Score rises.
- Employment and Income Status: To assure loan repayment throughout the loan, lenders also verify that you have a stable job and a consistent source of monthly income.
- Current Loan Repayments: Before deciding whether to approve your loan request, lenders also keep track of all of your past EMIs. They typically calculate your monthly income ratio and EMI outflow. Make sure EMI payments do not represent a significant portion of your income.
Each lender has a different set of specific paperwork requirements. However, lenders’ basic records include Identity Proof, Address Proof, Salary, and Bank statements.
It would help if you considered additional expenses besides the vehicle’s purchase price, such as taxes, registration fees, insurance costs, processing fees, documentation costs, stamp duty, etc. When applying for a loan, examining all the fees in advance is usually essential.
You don’t always have to choose the bank your car dealer recommends; if another lender has better loan conditions, you can always choose them. Therefore, before choosing a loan, always conduct in-depth research comparing lenders and their rates.
Some of the benefits of auto loan are:
- The total purchase price of the car is financed. You don’t have to wait until you have saved all or even some money if you need an automobile immediately.
- Tax deductions may be available for auto loans.
- The money can be used for other crucial items, and it aids in building credit.