The festive season is when people often buy personal vehicles, and hence you see banks creating attractive vehicle loan offers to help people complete their purchases. There’s a flurry of such offers now. If you’re looking to take a car loan right now, here are a few things to get started.
Check with your own bank
Often, the simplest way to avail a loan is by leveraging the relationship with your bank. Your bank would have created a pre-approved offer basis your income and credit profile. You can avail this with minimal paperwork via netbanking, bank app, branch, or aggregator. Since your bank is aware of your cash flows through your savings account, you may be spared the form-filling. You can then connect your car dealer with your bank to wrap up the purchase quickly.
Check festive offers
Several large lenders have created festival offers which have such features as waivers or discounts on processing fee or limited-period interest rate concessions. One large government bank has a combo offer for home and car loans. You can check and compare these offers online. Offers are usually conditional. For example, you may need to have a salary account with the lender. Read through the offer’s fine print to understand your loan eligibility.
Leverage your ongoing loan
Ongoing loans help get fresh credit at low interest. Most large lenders give you a home loan top-up, which is essentially reborrowing on an ongoing loan. Top-ups are given to borrowers with the minimum track record for repayment— for example, 12 months since the start of the loan. Home loan top-ups are slightly costlier than home loans but could be the same as or cheaper than a car loan or a personal loan. For example, one large government bank’s lowest home loan rate is 6.70, but it’s lowest car loan rate is 7.25, which is the same as its lowest home loan top-up rate. Therefore, basis your own eligibility, it may be cheaper and easier to get a top-up, which can be put to any use including buying a vehicle.
Check your credit score
Before you apply for a car loan or any loan, be aware of your credit score which develops only if you’ve taken a loan or credit card in the past. Today, the lowest loan rates are reserved for those with excellent credit scores, which typically means a score of 750 or higher. If you are below that mark, you’ll pay a higher rate. Therefore, know what your score is immediately and avoid any rude shocks after the loan application. If your score is low, you may want to spend a few months improving it, so that you can become eligible for low-cost loans.
Clear off petty debts
Your car loan EMI will start off immediately. If you have ongoing dues such as credit card dues or a few personal loan EMIs left, you may want to clear them off. This will achieve two things. One, the lender will be more confident of your repayment ability since you don’t have other dues weighing your finances down. Two, after clearing your petty loans, your credit score should also improve, which will help you get good loan offers. The second point is important to those who were under the 750 mark. If you were already comfortably above 750 despite the dues, you do not need to worry about this.
Get down payment ready
If you are new-to-bank, your lender will need to see proofs of income, identity, and address. Lastly, get your down payment ready. A few lenders will give you 100% on-road financing within limits. Many will finance up to 80-90%. If you’re buying a used car, the financing will be lower. Therefore, ensure you have the margin money as well as one advance EMI ready before you apply for the loan.
The writer is CEO, BankBazaar.com