How to Apply for a Vehicle Loan: A Step-by-Step Guide

A dream car is not just a dream but a big aspiration. But at times you might not have the cash up front. In such scenarios a vehicle loan could be your best bet. Whether you’re looking for a new car or a pre-owned one, a vehicle loan could be helpful in financing the purchase without burning a hole in your pocket.

What is a Vehicle Loan?

A vehicle loan is a type of financing that helps you purchase a car or commercial vehicle. These days banks are providing vehicle loans across segments like loans for new as well as used cars and commercial vehicles, with flexible repayment tenures and affordable interest rates. Unlike the personal loan, the vehicle loan is a secured borrowing process and comes with lower interest rate. The car itself acts as collateral till you repay the entire amount within the pre-determined schedule.

Vehicle loans come with varying interest rates, loan terms and the flexibility of down payment options to cater to the needs of borrowers from all income categories.

How to apply for a vehicle loan?

Step 1: Check Your Eligibility

Before you start, it is important to ensure you meet the basic eligibility criteria for a vehicle loan. Though the eligibility criteria may differ from lender to lender, most banks require the borrower to meet these conditions:

• Age- 21 to 65 years
• Monthly income should be at least ₹15,000 to ₹20,000
• A credit score of 700 or higher
• Salaried employees are preferred but a stable income is mandatory
• The borrower should be an Indian citizen

Step 2: Choose a lender

Once you’ve confirmed your eligibility, it’s time to shop around for the best loan deal. Compare interest rates, loan tenures, processing fees and any hidden charges to ensure you are getting the best deal.

Step 3: Gather required documents

To apply for a loan, you will need some documents to prove your identity, income, and address. The common documents include:

• Identity proof: Aadhaar card, PAN card, passport, or driving license
• Address proof: Utility bills, rental agreements, or passport
• Income proof: Recent salary slips, Form 16, income tax returns (ITRs), or bank statements
• Employment proof: Job offer letter, appointment letter, or business registration documents if self-employed.
• A vehicle quotation or invoice from the dealer, as the lender will need to know the cost of the vehicle you intend to buy.

Step 4: Apply for the loan

You can apply for the loan either online, offline, or through the dealership. To apply online, visit the lender’s website, fill out the application form, and upload the required documents.

You can also visit the lender’s branch and submit the application in person. Many car dealerships also have tie-ups with banks and NBFCs to facilitate vehicle financing at the outlet.

Step 5: Loan processing and approval

Once you have submitted your application, the lender will process it by verifying your documents and checking your credit score. They may also conduct a background check to assess your creditworthiness. Depending on the lender, this process can take anywhere from a few hours to a few days. If everything looks good, the lender will approve the loan and provide you with a loan agreement outlining the terms and conditions.

Step 6: Loan disbursal

Once you have agreed to the loan terms, you will sign the loan agreement. The lender will then disburse the loan amount, either directly to your bank account or to the vehicle dealer.

For new purchases, the amount will typically be sent directly to the dealer to cover the cost. If you are purchasing a pre-owned car, the funds may be disbursed directly to your bank account.

Step 7: Repayment

After receiving the loan amount, you will need to start repaying the loan through equated monthly instalments (EMIs). These payments will continue over the loan tenure, which could range from a few months to several years, depending on the terms and conditions of the loan.

To sum up, a wide range of vehicle loans are available these days with flexible interest rates and loan tenure. A comparison of multiple loan offers could be a prudent step to avail the loan at the best interest rate and friendly terms and conditions.

This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.