What Checks are Done for Car Finance?
Most people purchase new cars using credit agreements to spread the expense over several months. People choose car financing because it is a simple, quick process that allows them to spread out the cost of the car's purchase across equal monthly payments without any significant fiscal consequence.
Though car financing is a service all banks provide, only some receive the same interest rate. In addition, because banks conduct different car loan inspections before financing your car, not everyone can choose the desired amount.
Applying for a vehicle loan is simple, but you must know the necessary paperwork.
Basic Checks Before Getting a Car Loan
Here are some of the basic car checks done before getting car finance-
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Identity Verification
The first thing you'll need to do is verify yourself with the lender. When you fill out an application form, they will ask you to give basic information, such as your full name, date of birth, marital status, and residential status.
You'll also need to submit proof of identity to reassure banks that you're not fraudulently seeking car finance on someone else's behalf or using someone else's information.
Your Aadhar card, PAN card, passport or any other government-issued identity containing your full name, date of birth, marital status, and residential status is acceptable for identification.
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Driver's License
While some lenders will lend to those with provisional licenses, most will ask you to have a complete and legal Indian driving license. During the application process, you must provide a copy of your photo license, and the lender may contact the DVLA to verify that all of the credentials are accurate.
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Past Addresses
You do not need to be a homeowner to qualify for auto finance, although lenders may ask you to have a three-year residence history.
Typically, lenders demand two utility bills in your name, and bank statements are also acceptable as address verification. Ensure you provide these facts as accurately as possible, as even a slight error with your old postcode or house number could result in your application getting denied.
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Credit History
Credit scores indicate your financial stability and help assess whether you can repay the loan without defaulting. This evaluation heavily influences the approval of funds. It also impacts the interest rates you are qualified for.
To check your financial state, lenders will either use their systems or solicit the assistance of external credit agencies.
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Income Proof
Finance companies examine an applicant's income statement and employment history to ensure they will not default on their loan repayment.
If an applicant is salaried, they will be asked to provide a copy of their most recent pay stub, Form 16, and employment letter. In addition, to establish the business, self-employed individuals will want current bank statements, a balance sheet, a profit and loss statement, and a relevant government certificate.
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Employment Details and History
When applying for vehicle financing, the lender may want the name and full address of your last three employers. This is because it will assist them in determining whether you can work and earn an income until all your repayments have been made.
You must also include your current job title and income. If you are self-employed, the lender will generally require prior bank statements to substantiate your income.
When Are Car Finance Credit Checks Carried Out?
A soft credit check will be performed when you check your eligibility for car finance or request a quote. It does not affect your credit score, but it supplies the lender with enough information to determine how you now handle your loans and what type of borrower you've been.
If the information you've provided meets a lender's requirements, you'll get approval in principle. However, a preliminary approval is not binding.
The success of your application will still be determined by criteria such as the documentation you provide, the type of car finance you pick, and the vehicle you intend to purchase, but it can be a good sign that you will get a loan.
How Long Does It Take for Car Finance to Be Approved?
After you have submitted your car finance application form and all required documents, you must allow the finance company time to conduct their checks and inquiries.
A car credit application is usually reviewed within 1-2 business days. When the checks are concluded, one of three things will happen-
- Your application gets approved. Once approved, the contract will be activated, and the authorized dealership or broker will get the funds.
- Your application gets rejected. If your application was denied, the financial company thought you were too risky and did not believe you would be able to follow the terms of the agreement.
- The finance company will require additional information. If this occurs, it implies that your application is under evaluation, but more data is necessary before any final decision.
We advise you to supply all the necessary information and documentation at the start of the application process to guarantee that your application is accepted quickly and smoothly. You could even be able to drive away in your new car on the same day!
How to Choose a Lender to Finance a Vehicle?
Almost every bank in the country offers car loans today.
So when you, as a borrower, look for a financial institution to finance your car, you should check interest rates and other fees. These expenses could add up to your total cost outgo.
For instance, earlier this month, SBI, on the occasion of India’s 75th independence anniversary, waived all processing fees and provided other benefits to its car loan customers.
Your Choice
Companies now offer instant car loan facilities in a digital form to gain an advantage over their competitors.
In addition, leading financial institutions offer their pre-approved customers an instant online car loan facility with a 7-year tenure. All of these incentives seem appealing. However, looking at the total cost of ownership before committing is essential.
Costs, including down payment, interest charges, insurance premiums, and taxes, will also be part of the cost of the vehicle if you take a car loan. Hence, always study interest rates, repayment schedules, fees, the lender’s credibility, and other costs in advance.