Introduction

Driving a car is a dream for many people. One of the important prerequisites for driving a car legally is possessing a driving license. However, for owning a car, one needs to have a considerable amount of money. Many people opt to take a car loan to fulfill this requirement. In this article, we will discuss in detail the process of purchasing a car through a car loan and the required formalities.

The car loan process

The car loan process begins by selecting the car you want to purchase. Once you have identified the car, you need to apply for a car loan. The loan application process generally includes documentation of the borrower's identification and income proof. The lending institution reviews the application and sanctions the loan based on the loan eligibility criteria. After approval, the loan provider transfers the amount to the car dealership, and you can take possession of your new car.

Eligibility criteria for a car loan

The eligibility criteria for a car loan typically depend on the lender. However, some crucial aspects include an individual's age, credit score, employment status and financial history. Additionally, loan seekers may be asked for documents like proof of identity, residence, income, and employment.

Documents required for a car loan

The primary documents required for a car loan are proof of identity, address, income and employment. These may include PAN card, Aadhar card, passport, driving license, voter ID, and utility bills. Additionally, if the borrower is salaried, income proof in the form of salary slips and bank statements from the past six months is required. On the other hand, self-employed individuals may need to provide income tax returns and business bank statements.

Loan repayment methods

The repayment of the car loan is typically done in Equated Monthly Installments (EMI), which includes both the principal amount and interest. The borrower selects the repayment tenure, which ranges from one to seven years, based on their repayment capacity. The lender may offer a lower interest rate for a shorter tenure or a higher interest rate for a more extended period.

Benefits of taking a car loan

There are several benefits of taking a car loan, including the ability to buy a car without having to pay a lump sum amount. Additionally, car loans may offer lower interest rates than other types of loans, flexible repayment options, and tax benefits.

Conclusion

Buying a car through a car loan is an affordable and convenient method for many consumers. The process involves a few steps: selecting a car, applying for a loan, loan sanction, and repayment. The loan provider may have eligibility criteria and require documents, such as proof of identity, address, income, and employment. The repayment is typically done in EMIs for a duration ranging from one to seven years. By taking a car loan, buyers can fulfill their dream of owning a car while improving their credit scores and accessing tax benefits.