Funding at short notice can be a concern when seeking to financing big-ticket purchases like four-wheelers. In such scenarios, dedicated car loans can help secure necessary funding with minimum hassle and under a short duration. A loan against car is a customised funding option that allows you to purchase your new car under an arrangement that hypothecates the vehicle until the loan liability is completely repaid. As secured funding options, these loans come with simple eligibility terms and are accessible easily through a simple application procedure.
Once availed, a borrower thereby needs to repay the advance in EMIs payable as per the decided repayment schedule over agreed tenure. Now, even though all these sounds to be simple and easy to manage, it is pertinent to be aware of all details related to your loan before borrowing so you are well-informed of the finer intricacies of the advance. Let’s check out some of them.
Important Things to Check Before Borrowing
-
Application process
You must check the application process involved before applying for the loan so that you are well-prepared to complete all necessary steps without any hassle. Lenders today provide the option to apply for a loan against car both offline and online. Individuals can thus choose a suitable process to apply for the loan. It is ideal to go for the online process as it is quick and convenient and eliminates any redundant step of offline application.
-
Document requirement
Even though a secured funding, availing a car loan still needs you to meet a few document requirements for paperwork completion. It is best that you arrange all the documents beforehand to streamline loan processing when applying for the advance. Some lenders also provide doorstep document collection facility, eliminating the need to step out of your home for loan application altogether.
-
Eligibility criteria
You must make sure to check all eligibility requirements laid down by the lender as well. Meeting all criteria allows you to secure funding at favourable terms, which, in turn, eases loan management and repayment. Common requirements for a loan against car are based on factors like borrower’s age, income, city of residence, and the likes.
-
Interest rate and charges
It is pertinent to check interest rate levy on your car loan along with other applicable charges. This should help you assess the total cost of your loan and allow better planning of your repayment. Choose between fixed and floating interest rate system based on the market trends for maximum affordability. When availing a second-hand car, it is equally crucial to check the used car loan rate of interest levied by a lender to better decide on the loan option.
Critical Questions You Must Ask When Applying
Alongside the factors mentioned above, it is also best that you acquaint yourself with additional details by answering some of the questions listed below.
-
What is your credit score?
Even though a secured advance, credit score for a car loan can still be crucial as it helps the lender determine individual creditworthiness. It is ideal to hold a credit score above 700 when applying for the loan.
What is the maximum LTV your lender provides?
The LTV or loan to value ratio a lender offers determines the maximum loan availability for your car as a percentage of its current market value. The best lenders offer LTV of up to 95% on loans against car.
-
Is the loan tenure suitably flexible for repayment?
Flexibility of a loan tenure allows you to choose a repayment term suitably that helps with affordable repayments in easy EMIs. Ideally, car loans come with flexible tenures of up to 5 years. Use an EMI calculator for optimal selection of your repayment term.
-
What is the cost of prepayment facilities with your lender?
Prepayment of car loan can significantly bring down the total interest payable. However, fees levy on these facilities can cancel out such benefit. It is thus crucial to check charges levied. Some best lenders eliminate these charges on loan prepayment altogether.
Based on these considerations, once you have decided on your loan against car option, make sure to compare lenders based on features and facilities provided. Accordingly, apply with the lender that offers the best terms on your advance.
