Vehicles are a basic requirement for every person nowadays, is it for daily use or business purpose or as a source of employment for many people. Even though the price of vehicles varies based on the brand and its features, many people can afford to purchase them, but for people who have less funds, banks have auto loans scheme. This scheme is specially made for people who have insufficient funds for such an expensive purchase. Due to this scheme, people are able to gain employment by using the vehicle for commercial transportation while other can buy their dream cars and two-wheelers.
What Are Auto Loans?
This is a type of loan where the lent-out vehicle is collateral security by the lender. This is a secured loan for new and used two-wheelers and 4-wheelers as well as commercial vehicles like auto rickshaws and taxis. The amount of such auto loans are repaid to the lender in several equal instalments and the whole amount are paid within 12-84 months based on the terms and conditions of the lender.
Auto loans are offered by banks based on the type of vehicle in transaction and the interest amount varies accordingly. For instance, the rate of interest for a used car is comparatively higher than that for a new car. Your credit score will also have a significant impact on the interest rate for auto loans.
Requirements Of Lender:
Just like you evaluate the lending banks before going to get an auto loan, similarly, the lender evaluates and looks for certain specific requirements that you have to meet to qualify for the loan. The requirements or the details that will affect your qualification for auto loans are as follows:
- Your monthly income or revenue – To check if the applicant is capable of the repayment of the loan, his monthly income should not be less than or equal to the amount of instalments. The income should be double the instalment amount.
- Your personal information documents – For checking any past criminal history of the applicant, his documents are necessary so that lenders can trust the applicant will not create default in payment or commit fraud.
- Your CIBIL score – Credit Information Bureau (India) Limited score describes your credit history in 3 numbers based on your behaviour in repayment of loans over some time. This score is not only important for granting auto loans but is considered by every lending institution before granting a loan application. The credibility of an applicant is defined based on his CIBIL score.
It has become very convenient for people to own a vehicle now because of auto loans and it has become a source of employment because many loan applicants use the vehicles as taxis or work as transportation services for other people and businesses.