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How To Get Your Ca...

April 08, 2015 18:30

Most car buyers, these days, finance their cars (new or used one) through dealership finance, since bank loans take long for approval. However, the dealership finance comes with higher interest rates that might end up affecting your monthly budget. Therefore, experts recommend getting car loan approval through government or well-known private banks, finance firms or online lenders.

No matter what bank or finance firm you are opting, make sure that you get a pre-approved loan so that you can stick to your budget and might not face any issues while buying a car.

There are various benefits of pre-approved car finance in India such as better negotiating power, organized purchasing procedure and reduced financing fees. However, the major question still remains the same - How to get car loan approval easily? Here are 5 simple steps that will help you get your auto loan approval effortlessly within no time.

How to get car loan approval?

Review your credit report for errors: Check your credit report for errors such as incorrect credit limits, late payments or collection etc. If you find a dispute of error, resolve immediately as a single credit report error might increase your credit score and trouble you in getting approval for car loan in India. The Indian credit bureau provides credit report for free once a year.

Make sure you fulfill minimum loan lending requirements: Most banks or car financing firms require a minimum monthly pre-tax income and a debt-to-income ratio (DTI) for pre-approving loans to borrowers. You might not be able to increase your monthly income within short span of time, but you can certainly improve your DTI by paying off your credit card debts.

Compare rates at banks and car financing organization: By submitting multiple applications of the same type of car loans at different banks and financing companies, you can compare auto loan interest rates and select the best one for you. There are several credit scoring models utilized for practicing “rate-shopping”. If your credit score is below 680, then you might need to search for alternative lenders that finance subprime car loans in India.

Compare your pre-approved rate with the dealer’s offers: If you finance your car purchase within short time, it doesn’t guarantee you the best rate, especially when you have a good credit score. Since, most dealers collaborated with captive finance companies that provide low interest rate or 0% financing. You can consider the dealer’s ARP rate, but don’t forget to check for the additional down payment requirements.

Make sure you have insurance coverage: All renowned banks and car financing companies, these days, require borrowers to have full insurance coverage insurance on the financed car. The insurance policy ensures that a minimum part of the loan balance will be recovered in case of a guilty accident. A down payment less than 20% provides a high loan-to-value ratio (LTV). You require to have guaranteed auto protection (GAP) insurance as well.  It recovers the difference between the car’s insurance loss and the remaining loan balance.

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