Complete Guide on How to Get Car Loan in India

The convenience of having a car at your disposal has shifted to that of a basic need. The growth of financial organisations has led to lower interest rates for car loans. Also, the availability of quick and easy car loans has increased. 

There are several models for which you can get full financing. You can get full financing for the on-road price when you apply for a car loan. Plus, you can tailor the loan terms to your needs.

How to Get a Car Loan in India: A Complete Guide

To get a car loan in India, follow these steps:

1. Be sure to check your credit report.

To begin, review your credit record and score. Lenders can gauge your repayment reliability based on your credit score.

At Piramal Finance, you can get your credit report for free from all three credit bureaus. Your credit score isn’t present. Yet, this report will detail your past payment and credit activities. 

Reviewing your credit report might help you detect inaccuracies. Also, it can help you identify areas where you can improve.

One can easily get a free copy of their credit report. You can see this information on your credit card statement or whenever you log in to your account online with most financial institutions. Credit Karma is only one of many sites that provide free credit scores to new users.

The interest rate you pay on a loan depends heavily on your credit score. Though there is no hard and fast requirement for a borrower’s credit score to qualify for an auto loan, those with scores over 780 will receive the most favourable terms. 

Having your credit report handy before searching for loans will make the process easier. Also, it will help you find the best possible terms for your scenario.

2. Compute your budget and the amount you can afford to borrow.

When shopping for a car loan, it helps to have a clear idea of the model you plan to finance. The following are additional considerations to think about:

• The monthly paymentWhat is the maximum amount that you are capable of paying each month? 
• How much can you put down?Generally, a 20% down payment is the norm when purchasing a vehicle. The lower your monthly payment, the more funds you should put down initially. 
• How long of a loan you’ll needAlthough a longer loan term will reduce your monthly payment, it can also put you in the precarious position of owing more on your automobile than it is worth. Automobiles are infamous for their high rates of depreciation. You should select a loan term of 60 months or less to avoid negative equity. 

3. Pick a few reliable loan companies.

Find a lender when you have determined your budget and credit history. These are some of the alternatives:

• Credit UnionsThese community banks typically provide better interest rates than national banks. You’ll need to join, and in most cases, your entry is restricted based on factors like where you live or who you work for. 
• BanksBanks typically offer loans for things like cars. Rates may be more reasonable at a bank with which you already have a relationship. However, the initial interest rate for auto loans from many major banks is typically greater than for loans from credit unions. 
• Online LendersYou can obtain auto loans from a variety of online-only financial institutions. There is no physical location to visit, but the prices are often lower than those of brick-and-mortar businesses because of the lack of these fees.

4. Get pre-approved by those financial institutions.

After narrowing down your list of potential loan providers, it is time to start filling out pre-approval applications. In a pre-approval, the bank expresses a conditional willingness to offer you money. You can shop for the best interest rate by getting pre-approved by multiple lenders.

Even though dealerships may be able to help you secure financing, it is in your best interest to shop around first. Since it’s customary for dealerships to add a markup to financing rates, shopping around might help you determine if their offer is truly the best.

5. Examine the terms of each pre-approval offer.

You have 14 days from the time you first begin the pre-approval process to collect as many pre-approvals as you like without any negative effects on your credit score due to multiple hard credit inquiries. They will be treated as a single unit instead. A lender can see your full credit history with a hard inquiry, but it could lower your score.

Lenders typically grant pre-approvals for a period of 30 or 60 days. Check the terms, APR, and monthly payment on each pre-approval offer to find the best one that works with your budget.

6. Choose the offer you like the most.

Now that you’ve found a loan offer you can accept, you will take it. Depending on the lender, you may need to provide certain documents.

7. Go to the car showroom.

The next step is to sign various documents at the car showroom. After you and the dealer agree on a price, the lender you pick will often mail you a blank check, which you will fill out. At this time, you will also submit your initial deposit.

Lenders typically send out the payment due dates and amount due reminders after borrowers drive off the lot.

8. Automate your payments.

If you sign up for automatic payments with your lender, they may lower your interest rate slightly. When you opt for automatic payments, money will be taken out of your account on the day of your choosing every month.

You can usually set up automatic payments online or over the phone with your lender. Online or in the papers you receive after concluding your loan, many lenders will inform you of any rate discounts available before and during the application process.

Shopping around and getting prequalified with several lenders will help you receive the best conditions available when financing the purchase of a car, which is a significant investment.

Conclusion

One of the best ways to buy a car and improve one’s credit score is through a car loan. This guide discussed how to get a car loan in India in detail. But always shop around for the best loan terms, read the fine print before signing, and make your monthly payments on schedule.

Looking for a personal loan in India? Apply for a quick personal loan with Piramal Finance right now!