Financial firms and private banks have been reaping a significant amount of income from car loans for the past several years. It is one of the financial products that generate a lot of demand from customers too. Since the interest in owning a vehicle has not gone down, the need for financial help for buying one is not going to go out of demand either. These days we even have car companies partnering up with finance companies and banks to provide attractive and exciting loan offers for customers. The interest generated from auto loans is by no means a small percentage of the whole.
We do have a lot of variety in cars to shop from. Available in different designs priced in all ranges, we can choose any model we desire in any price range. We can small budget-friendly hatchbacks to fully equipped luxury sedans and SUVs that are lined up to be launched. Firms offer different loans with varied interest rates depending on a lot of factors involved and also on your eligibility to them.
For government employees, lower interest rates can be availed depending on the loan amount and other criteria. The rate of interest on the car loans also depends on a lot of factors such as the loan amount, vehicle type, borrower’s credit record and several others.
This article will mainly focus on the length of the time period it usually takes to process a car loan through the necessary channels of authority. To know how long it will take we need to first know what all it involves in the application process.
Car Loan Application Process
Banks these days are so excited about lending you money that they have simplified the whole process of application down to its bare bones. There is no requirement of you going to a bank when you can just go through every step of the process right from your home online. It involves the following steps:
- Filling out the Application Form: As an obvious first step, the applicants are required to give their basic and important personal details and credentials in the application form.
- Document Verification: Once you submit the application, the bank or the finance firm will provide you with a list of documents to be uploaded mandatorily.
- Credit Check: The lender will make a formal credit inquiry online to check your creditworthiness. Government-issued identification such as a driver’s licence, PAN card or passport will be requested to be submitted during your document verification for this reason.
- Loan Approval: After your documents are verified and the applicant is found eligible for the loan, the applicant will be approved for the amount within a minimum of 2 days.
- Disbursal of the Loan Amount: Once the loan is approved, the loan amount will be immediately transferred to your linked bank account. Some banks provide you with 80 to 85 per cent of the car’s total cost while you pay the rest 15 to 20 per cent.
Delays in Approvals
Missing required documents
The usual list of documents requested for approval of your car loan includes:
- Aadhar card/ Voter ID for Personal identification
- PAN card for Proof of income
- Driving license
- Proof of Address in the form of a Gas bill, Electricity bill or Renter’s Agreement, etc.
- Proof of assets and liabilities
- Information about your car and insurance
If you do not provide any of these, you will cause a delay in the approval process.
Poor credit score
CIBIL score is the credit score given to you for your suitability as a borrower based on your loan repayment history. Poor credit score can result from any previous payment defaults, bankruptcy, poor maintenance of your bank account etc. This will definitely affect your credibility as a prospective customer for a loan. However, there are some firms and banks that will assign you a loan with a co-signer or for an initial large deposit to assure that the debt will be settled on time.
Insufficient Information on the Car
Any of the financial firms or banks lending money will expect you to provide them with all information on the car you are buying. This will help them decide on the loan, amount, tenure and EMI that can be approved for you.
The list of information that will be generally required by the financing party will include:
- A dealer invoice or contract of sale (containing address, contact number, ABN, etc.)
- Vehicle chassis number
- The year, brand and model of the car
- New car or Pre-owned car (Banks or lenders provide used car loans for pre-owned cars less than 3 years old.)
- Vehicle’s registration
- Insurance documents for the car
Doing your homework on the application process before you begin and getting in hand all the necessary documents will save you a lot of time. Also, submitting the right documents within the stipulated time will prevent further delays in the application process. As for making the approval come faster, the most important thing you can do is always maintain a good credit history so your CIBIL score looks good on your application. Pay your existing loan EMIs on time; settle your debts within the loan tenure and the banks will love to push your application forward faster.
Now armed with all this information, let us know if you found the process simplified and understandable for you. Comment below to share your experiences with the financings for car loans.