Beyond its symbolic value, a car diminishes reliance on public transportation. It offers a more efficient means of reaching destinations swiftly. However, buying a car necessitates substantial financial investment. Even opting for a used car involves a noteworthy expenditure. Hence, people apply for a Car Loan. It lets them purchase a car by providing the necessary financial assistance.
In most cases, it entails additional Insurance coverage for your safety. However, before opting for it, you should know about specific aspects of such Loans. Consider the list of frequently asked questions for a better understanding of the concept.
- How does a Car Loan work?
You apply for a Car Loan from a lender, such as a bank or credit union. Once your application is approved, you receive a lump sum amount, which is used to purchase the vehicle. You then repay the total Loan in monthly instalments, including interest, until the Loan is fully paid off.
- What are the documents required for the Loan?
Reliable lenders usually ask for minimum documentation for a Car Loan. They understand your needs and, hence, keep the process simple. However, to sail through the process, you need to promptly present relevant documents like:
- Valid passport
- Voter ID
- Aadhaar Card
- Latest salary slip & Form 60 as income proof
- Bank statement for the last 6 months
- Job card issued by NREGA
These are just a few examples. Your lender could ask for more.
- How do you repay a Car Loan?
Repaying a Car Loan is relatively easy. Through equated monthly instalments, you can pay off the amount gradually. You can also decide and set the amount of these EMIs in most cases. With the availability of a Car Loan EMI calculator, you get a clear idea of these aspects within seconds.
- What factors determine the interest rates on Car Loans?
Various factors influence the amount of your Car Loan interest rates:
- The Loan tenure
- Age & model of the car
- Your occupation
- Your debt-to-income ratio
- Does a Car Loan require collateral?
Collateral is any asset you present against the Loan amount. Ideally, most lenders ask the borrower to provide such collateral. However, a Car Loan does not demand such a requirement. You need not present collateral as the car itself serves as one.
- Do you receive additional perks?
Such Loans offer various other benefits besides helping you finance your car purchase. Some examples include free servicing, free road tax on the Loan amount, etc.
- How long does it take for the bank to disburse the Loan amount?
Reliable lenders nowadays offer quick disbursal. Once your Car Loan application gets approved, the amount gets credited to your account almost instantly.
Conclusion
A Car Loan helps when you want to purchase a vehicle but do not have sufficient funds. However, having sufficient knowledge about it is important. The listed FAQs are intended to help you establish the same.
