Finally you have chosen the car of your dreams and just can’t wait to get behind the wheels. However a cumbersome process of loan awaits you before you could actually purchase the vehicle that sets your heart racing. In reality if you do a little homework and get a little organized, you will realize that the process of applying for car loans is not so cumbersome after all. But before we jump onto understanding the application process for car loan, let us take a sneak peek at the important factors your bank or lender considers before approving the loan.

Income of the Applicant

One of the most important factors while applying for car loan is the income of applicant. Banks and lenders would approve a loan only of they feel confident that the applicant has enough income to repay the loan installments. If the applicant has low income then it makes sense that he or she applies for a loan jointly with spouse. The effect of income clubbing can drastically increase the chances of getting car loan approved. Obtaining a guarantor can also help in such cases. However the guarantor must be someone who is reliable and financially stable.

Credit History

It is very easy for banks and lenders to get hold of credit history of just about anyone. Credit history discloses the financial track record of an applicant including payment defaults, credit cards held, outstanding balances on such credit cards, other loans and liabilities. A solid track record can smoothen the process and increase the chances of obtaining the car loan.

Credit Score

There are tools like Experian Credit score with Letzbank that give out your credit score for free. So what is this credit score? Well Credit Score is an objective number which categorizes an applicant’s loan repayment capability into excellent, very good, good, poor and very poor by assigning a credit score. Credit score takes income and financial track record of the applicant into account to arrive at a credit score which is usually measured on a scale of 1-10 where 1 is worst and 10 is best. Do visit our credit score tool to obtain your credit score and we also have a guide that will take you through practical tips and steps to improve your credit score.

Approved Dealer

Most of the time, lenders have tie ups with certain specific car dealers. So you can pick your dream vehicle from the dealer who is approved by the bank or your lender. We must mention here that buying the vehicle from approved dealer does not mean that lender is bound to accept and approve your loan application; it merely implies that the dealer is vouched and verified by the lender. However it does result in a hassle free and smooth processing of the loan application.

If the above factors are satisfactory, the application approval takes about 3-6 days. Now let us discuss the steps for application process.

➤ Choose the vehicle:

This is obviously the first step to begin the overall process. Choose a vehicle that suits your requirement as well as pocket. Remember it is you who has to repay the loan and car is a one way investment which fetches really low price on resale. Also take the list of financiers with whom dealer has tie-ups.

➤ Assess multiple lenders:

There are various lenders in the market who are more than happy to service good applicants. So how do you pick the best one? This necessitates a thoughtful evaluation which includes rate of interest, reputation, review, track record and terms and conditions of the loan. For easy comparison, do visit Letzbank Website where we give you a comparative display of numerous reputed lending agencies in India that will help facilitate an informed decision.

➤ Prepare and submit documents:

This is an important step so make sure your documents are in order and organized neatly to submit with the application form. Following are the standard documents requested by the lender.

Application form: The format and form is given by the lender and needs to be filled by the applicant.

Know Your Customer (KYC)- KYC is a legally mandatory process to be undertaken by every lender. It is a due diligence process that helps lender assess the repayment capability of the applicant. It includes furnishing of personal information including photograph, identity proof, address proof and age proof. For this purpose one may submit copy of PAN card, Adhaar Card, address page of passbook, ration card, driving license, identity card, electricity or utility bills.

Signature verification - Bank Statement

Income Proof - IT returns of the past few years, salary slips etc

Additional documentation may be required from case to case and lender to lender basis.

➤ Field Visit - After the application is submitted, bank or lender’s representative shall pay a visit to verify the details disclosed in the application by the applicant.

➤ Approval and sanction - If the lender is satisfied with details furnished and field visit then the application shall get approved. This is intimated to the customer and a sanction letter is sent in this regard.

➤ Loan disbursal - In case of approved dealer, the bank may pay the amount directly. In such case the applicant does not have to handle the loan money. In all other cases the amount is credited to borrower’s account. Do note that bank usually finances maximum of 90% of the vehicle price and rest is required to be paid by the applicant as down payment.

These were the six steps in application process for car loan. Check out Letzbank for the best terms and conditions for car or any kind of loans you may be in need of. Our portal facilitates comparison of the best names in the lending industry and decision making. You can pick your loan at just a click of mouse from the comfort of your home!

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