Things you need to know before applying for a car loan

Car loan

Things you need to know before applying for a car loan

Apr 19, 2020, 6:55:42 PM Business

The necessity or luxury – whatever you want to address your car, the truth is after buying a nice house everyone wants to become a car owner. It definitely makes your everyday life comfortable. Now, you can drive off to miles away instead of boarding an overcrowded public vehicle. Years back, a person had to invest a huge amount to become a car owner and thus it was known as the indicator of the highlight in one’s life. These days, not only rich people, but the common people like you and I also have the chance to buy a car. Several banks and financial companies offer simple car loan along with easy EMI schemes. So, it’s now easier to get a car without upsetting your regular budget.

Car loan offerings:

Financers or lenders offer a car loan on both the old and new cars. Obviously, the interest rates are completely different for a pre-owned car or a new car. Now, you may ask whether you need to fulfill certain eligibility conditions before applying for a car loan. The answer is yes. These conditions may include the age, residence area, the employee type and the minimum salary requirements. A few other categories are also there but these may vary from one financer to another.

Which documents are required to apply for a car loan?

These following documents are the most basic ones that almost every car lender asks their clients.

  1. Identity proof including passport, PAN (Permanent Account Number), driving license etc.
  2. Address proof like passport or voter ID card.
  3. Age proof
  4. Car documents
  5. Salary proof or bank statements. This is necessary to establish your current income. They may ask to provide six months’ bank account statements or 3 months’ income slip and current income-tax return.
  6. Your photographs

Some of the lenders also may ask for a valid car insurance copy while accepting your car loan application.

Now you may why it’s necessary to provide your income slip to the car dealer? Well, if the dealer asks you about it, he/she wants to verify your actual income or the amount of in-hand cash from the Bank Statement. But you always have the option to provide it without disclosing too much of your private information.

Hypothecation:

When you have bought a car via a loan, the car will be hypothecated to the financer. It provides the right to the lender to seize it. For example, if you don’t pay the EMI on time, this situation may occur. This is a part of the registration procedure. After completing all the EMIs, you can change the owner’s name of the car. 

Things to look for in an agreement for a car loan:

Effective date: This is known as the approximate date on which the initial payout of the car loan is made. Interest will start to be computed starting from this date. 

Amortization schedule: This is known as the schedule for the borrower to repay both the principal and the interest simultaneously. When you have signed the agreement, the borrower can contest the schedule accordingly. 

Default: You must be aware of the reasons and implications of default in repayment. But a few people know that most of the agreements don’t provide any notice or reminder to make sure that you are clearing your dues in time. 

Set off: A standard loan agreement says that the lender has the right to set off a certain amount of money, insurance claims or securities that are already deposited with them to recover an outstanding amount that you are unable to pay without notifying the borrower in advance. 

Inspection and assignment: The lender always has the right to inspect the vehicle and the associated documents at any time without providing prior notice during the loan repayment term.

Published by Linda Lee

Written by Linda Lee

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