Frequently Asked Questions for Car Loan
Last Updated : March 25, 2016, 11:14 a.m.
These days, not only one, but many people prefer to get a car loan when it comes to purchasing a new car. With many renowned banks and lending institutes available in the market, it becomes quite easy for every car dreamer to fulfill his desires of owning a car. But, once you apply for a car loan, there are numbers of frequently asked questions that usually come in the mind of many people. So, here are some common frequently asked questions with their answers:
How to Avail a Car Loan?
You need to research a little bit before applying for a car loan. Start with comparing the best car loan offers offered by different banks, and select the one that suits you best. After that, apply for a car loan in your favourite bank and you will be then contacted by an executive of the bank so as to process your application, depending upon your eligibility for car loan.
For How Much Loan Amount I am Eligible For?
Many financial institutes or banks usually provide approx 85-90% of the car value as a car loan. However, the full and final value might be different, as it depends upon bank to bank. When it comes to deciding the loan amount, lot of factors are important for bank to consider i.e. income of the applicant, credit score, ROI, cost & type of the vehicle and many more factors that make you eligible for maximum loan amount
What Documents are Required for Car Loan?
To avail a car loan, you need to submit your identity proof, income proofs, age proof, bank statements, documents of the vehicle, address proof, insurance documents and some others documents.
How Much Processing Time is Required for Car Loan?
Once all your documents are submitted in the bank, the further process usually takes nearly 3-7 days. Yes, within less time frame, your loan will be sanctioned and you will be able to enjoy all the benefits in minimum time.
Can I Negotiate on Interest Rates?
Yes, you can negotiate with the bank regarding your interest rate. Usually, interest rates for car loans are not fixed in the banks as it totally depends upon the applicant. The banks can negotiate on interest rates for their loyal customers. If you have a good credit history and made regular payments for your loans in past, the banks might consider you worthy enough to provide low interest rates.
What Options DO I Get with Interest Rate?
Banks generally offer two types of interest rates to all its customers. One is floating and another is fixed. So, it totally depends upon you to choose the one option that suits you. Either you can go with the fixed rate of interest or choose the floating one, offered by different banks.
For Car Loan, What is the Tenure?
The tenure for a car loan usually ranges from 1-5 years. If you are ready to pay the higher EMIs, you can avail a lower loan tenure, or if you are comfortable with less monthly EMIs, your tenure will increase. However, in many cases, banks or lenders are ready to provide you up to 7 years of loan tenure.
What are the Reasons of Loan Application Rejection?
There are possible chances that your car loan application might get rejected because of a bad credit score. This kind of situation generally happens when you have applied for credit cards or loans many times in the bank, not made proper payment of EMIs, or if you don’t match any of the eligibility criteria. If you are applying for the very first time, other factors like your income, organization you are working with, etc also matter a lot for car loan.
How Can I Pay My EMIs and What About Pre-Payment?
You can easily pay your monthly EMIs, either through post-dated cheques or you can also request the bank to debit the money directly through your account every month. However, in case of car loans, one is not allowed to make the part payments, thus one can have the option to pre-pay the loan after 6 months to 1 year. But, before doing so, you need to check this rule in your bank. If an applicant pre-pays the loan before this period, the bank will charge a penalty of nearly 2-4% from the applicant on his outstanding loan amount.
What Will Happen If I Failed to Pay EMIs on Time?
Well, you need to pay your monthly EMIs on time, though many renowned banks on the basis of their customers history allow them to skip one or two EMIs. But, beyond this limit, you may considered as a defaulter, and the bank has the complete authority to seize so as to seize your vehicle legally. Not only this, skipping the monthly EMIs will also affect your credit score, and ultimately reduce your eligibility of getting a car loan in the future.
Is It Possible to Get A Loan for a Used Car?
Yes, it is possibe to get a loan for used car or second hand cars through many banks or financial institutes. But, for such vehicles, the interest rates would be higher for you to pay. Not only this, other factors like repayment capacity, value of the car, etc also be considered by banks, just like in case of buying a new car.