10 Frequently Asked Questions before Taking a Car Loan
Most of us prefer to get a new car financed. Today car loans can be easily availed through any bank. However, there are a number of frequently asked questions we need to ask before taking a car loan.
1) How to get a car loan?
The golden rule is to compare the best offers from various banks and apply online. As per your eligibility, you will be approached by the bank staff later to process the loan.
2) How much loan eligibility do I have?
Financial institutions today, offer up to 90 percent of the car value as auto loan. However, the final value might vary from lender to lender. They check factors such as the cost of the vehicle, type, make and value in the second-hand market while deciding the amount of loan to be offered. Even 100 percent of the car value is covered by many banks today based on past credit history and current credit score.
3) What are the documents required and what is the processing time?
You would require submitting your identity, address and income proofs along with the loan application form duly signed. After submission of the relevant documents, it normally takes about 3-7 days for processing and getting the loan sanctioned.
4) Can interest rates be negotiated?
As interest rates for car loans are not fixed, they can be negotiated. If you are a loyal customer to the bank and have made regular payments for a previous loan(s), with good credit history they might consider and revise the existing interest rate for you.
5) Is there an option in choosing a type of interest rate?
The two types of interest rates which are offered are: fixed and floating just like a home loan. You can then choose the bank which offers the one you need.
6) What Are The Extra Charges To Be Paid?
Apart from the interest rates, the documentation and processing fee for your car loans is also applicable. This charge varies from lender to lender. Most private banks charge a heavy processing fee which also varies depending on the loan amount. So always remember to clarify these charges before you apply. It is very important to find these costs and compare with other banks to get a good deal where the fees are the lowest.
7) What is the tenure for a car loan?
Typical tenures for car loans range from 1-7 years. You can opt for a lower tenure if you can pay a higher EMI (equated monthly installment) or a longer tenure if you want a lower EMI.
8) Will my loan application be rejected?
Based on your credit score, the applied car loan can get rejected. This happens mainly with poor credit rating and credit score often due to multiple loans/credit cards application, defaulted on EMI payments, etc. For first-time loan applicants, factors like income, organization one works for, etc. are considered.
9) How to pay Equated Monthly Installments? What about pre-payment?
Paying EMIs is very easy and can either be done through post-dated cheques or giving an auto-debit instruction to the bank from your account every month through ECS (electronic clearing system) option. In car loans, part payments are not allowed, however, you can pre-pay the entire loan after 6 months to 1 year. Before deciding to pre-pay, make sure you check with your bank upon this rule. If you pre-pay before this period, then a penalty of 2-4 per cent on the outstanding amount is levied.
10) What if I don’t pay EMIs on time?
EMI payment needs to be done regularly. Most of the banks allow you to miss one or three payments. However, beyond that, you will be treated as a defaulter by the lender. They would have full authority to seize your vehicle. Also, in the case of payment default, your credit score will take a hit which will eventually reduce your chances of future loan eligibility.
Some banks even offer free car insurance along with their loan, which is really an additional advantage. So before you opt for a car loan, make sure you ask these questions to your bank to take the best decision.http://www.khbuzz.com/2017/03/11/10-frequently-asked-questions-before-taking-a-car-loan/http://www.khbuzz.com/wp-content/uploads/2017/03/bigstock-Small-souvenir-car-on-saleswom-108852668.jpghttp://www.khbuzz.com/wp-content/uploads/2017/03/bigstock-Small-souvenir-car-on-saleswom-108852668-150x150.jpgAutomobilesCarauto loan,car insurance,Car Loan,EMI,EMI payment,Financial institutions,interest rates