5 Tips for a Smooth Auto Loan Application
Congratulations!! After months of research and discussion with friends over tea you are have finally settled upon the car you wish to buy. Now for the next step; financing the purchase. Whether you are eyeing a brand-new car or a used one, paying upfront the entire value is, in most cases, not feasible and even not recommended since getting an Auto Loan has never been easier. Below are just a few tips to ensure a smooth application:
- Compare Bank Deals:
In order to ensure that you get the loan that best suits your requirement, it is absolutely essential to compare the Car Loan deals offered by different banks. This is because mark-ups differ among banks and some banks offer special deals such as free insurance, quicker processing times, early payment and balloon payment options (in which you can reduce your principal loan amount through a lump sum amount payment). With a multitude of online comparison sites, you can just type in the model of the car, the down payment you are willing to make, and the tenure of the loan and they will give you details of the best deals, based on these requirements. A few sites to begin your journey are:
- Know Your Costs:
Applying for a car loan doesn’t merely involve paying monthly installments. There are a number of costs that need to be taken into consideration and thus you need to budget accordingly. A list of probable costs is:
- Down payment: Usually banks finance 85% of the vehicle’s value and a down payment amounting to 15%-20% (depending on the bank) will be required
- Insurance + Tracker: Car Insurance is mandatory for all banks who have deals with Insurance companies to offer reasonably priced insurance for individuals who avail their Auto Finance facilities. Usually first year’s insurance premium has to be paid upfront and from the second year it is added as part of the each month’s installments but this may differ for each bank. Additionally, the insurance cost may or may not include costs for tracker which is also mandatory by most banks to prevent against theft.
- Registration and Processing fees: No matter whether the financing is for a used or new car, the car loan does not cover the cost of registration and bank processing charges.
- Determine Your Eligibility:
Although exact eligibility requirements differ among banks, the criteria are almost always set around the following parameters:
- Pakistani Citizen
- 21- 65 years
- Minimum Income requirement (based on the profession; Salaried, Government employee or Business owner)
- Relation/Service length (e.g. Permanent or Temporary employee, one year of employment with current company etc.)
One other important consideration which can be easily overlooked is your credit history/score. This will enable the bank in the approval of your loan application. This could be in the form of any previous loans you may taken (either personal or through credit card) and whether all payments were made on time. A defaulter may find it harder and more expensive to get a loan. In the worst case, the rejection of the loan application will further lower your credit score. In the application processing phase, banks conduct extensive checks including reviewing details of your credit history, confirming your employment through visiting or calling your employee, doing home visits to determine assets, so be sure to provide accurate information throughout your application.
- Decide Your Tenure.
Most banks offer car loans from 3 to 7 years (could be less or more) . A longer tenure will reduce monthly installments whereas a longer tenure will add extra markup in the longer run. Depending on your ability to pay every month, you can decide the tenure of the loan. Remember that insurance will have to be paid every year for the length of the tenure.
- Gather Your Documentation:
Finally, you are ready for submitting the car loan application. It is a good idea to visit the bank you have decided upon and have a candid conversation with one of the relationship managers regarding your requirements and the necessary documentation you need to submit. They will also inform you of when the car, if new, shall be available as it may take a while (even 6 months in some cases) to get depending on current supply.
After that, gather all necessary documentation exactly as per the bank’s requirement. Although this may differ according to each bank, some basic documents remain the same:
- Original Computerized National Identity Card (CNIC)
- Passport Sized photographs
- Salary Slip
- Proof of Ownership/Tax Returns/Income statement (For business owners)
- Bank Statements (past 6 months)
While finding something that matches your need can be very daunting and is not less than a herculean task, however with the karlo car loan application, you can compare credit cards, personal loans, car loans and much more of giant insurance companies, which will ultimately help you find the best for your needs. The fact is, a bit of digging can help you find the right auto loan cover that will definitely give the best protection for your car.
Last but not the least, carefully read the loan documents provided by the bank before signing.