There are many financial competitors in the market who provide loans. Ergo, getting a car loan is not very difficult. However, if you want to get an auto loan at a reasonable rate of interest, then you should have an adequate credit score, with good credit history.
Prerequisites for a Car Loan
The documents that a bank or a financial institution would ask for are :
- Income proof
- Permanent and temporary residential address proof
- Photocopies of tax return paperwork
- Bank statement of past three months
Remember, the bank will surely verify your credit rating and credit history.
If you have a bad credit score, getting a car loan at low interest rate is going to be difficult. The financial institution will require the same set of documents, but you may have to pay a larger down payment and a high rate of interest. The time duration to repay bad credit loans varies from one to four years.
Before finalizing the deal with a bank, check out the rate of interest, terms and conditions, and other schemes offered by banks. There are basically two types of car loans – short-term and long-term. In a short-term loan, you will have to pay a low rate of interest, but the monthly installments will be large amounts. Whereas, if you apply for a long-term car loan, you get a longer time duration (3 to 5 years) for repaying the loan, and the monthly installments will certainly be small. However, in the latter case, you will end up paying more interest, than short-term loans. It is up to you to decide which type of loan is favorable to you, depending on your current financial status.
If you have a bad credit score, you should take necessary measures to repair the credit, before you apply for a car loan. If you are paying a high annual percentage rate (APR) on the loan, it is always better to consider going for refinancing. In this way, you can get a better a rate of interest.
A refinance loan application form should contain the details similar to your current loan. Your application can be rejected, even if there is a slight variation in the refinance application, from your original loan application details. This is because your current loan is tracked with regards to the details provided in the refinancing application form.
Whether you have a good credit rating or not, you should first approach your local credit union. Check out the rate of interest with them. If it is favorable, consider becoming the member of the institution. Being a member, the APR would not only be less, but you may also get a small discount.
It is advisable to check out the rates of interest of various financial institutions online, through friends, or relatives, before zeroing in on one of them.