An auto loan is the one which is taken for the purchase for a car, be it new or an old one. Every person needs to lend money to buy a car unless the person has enough money to pay the whole amount at once. The moneylenders, in this case, are either banks or auto dealers. Every aspect of the person is taken care of while lending the money for the purchase. The loan is then paid through monthly payments. There are a number of factors on which an auto loan depends, some of them are discussed below.
Auto loans and its various aspects
An auto loan is termed on a number of factors which also includes the person’s credit history and income. Let us look upon some of these factors:
Length of the loan
A loan granted for a four-wheeler is paid from three to seven years. Quite obvious is the fact that the loan which is granted for a longer period will have less monthly installments and vice-versa. However, the amount of money paid in a longer duration longer is more in finance charges.
A loan can never be granted in a haste, in fact there is a whole procedure on which the money lending agencies and the banks work. There are certain a person must fulfill while applying for an auto loan such as the minimum age, minimum salary, employment and the area of residence.
Record of a credit history
It is always good to make sure that the credit report is well-maintained while considering leasing a car or before the purchase of any major product. One can get the reports through various agencies every year.
The need of a co-signer of the loan
When the applicant of the loan does not have any credit history or if the person has a weak credit record the in such a case the money lender always considers it safe that the applicant has a co-signer. It means that the co-signer also has an equal responsibility towards the loan. Whenever there is a delay in the payment of instalment it would cost both the applicant and the co-signer. If in any case, the applicant is not able to pay the loan, then the co-signer is liable to pay the loan. The co-signer must be aware of all these terms and conditions.
Documents demanded by the agencies
A certain number of documents are required without which the file of application is bound to get rejected by the bank or the agency. These documents are:
- An identity proof such as Permanent Account Number card (PAN), passport or a driving license.
- Address proof of the applicant which includes, voter ID card or the passport.
- Photographs of the applicant
- Documents of the car
- Income proof of the applicant which is given by the salary slip of the income of three months or six months.
All the above points conclude that the agencies do not require much formalities for a car loan as compared to a mortgage loan. Therefore, a person should prefer an auto loan instead of paying the whole amount of money.