With the range of car loan products available in the market, it is no longer a distant dream for a middle-class family in India to own a car. Most major financial service providers operating in the market provide car loans for their customers. In the recent days, the process involved in getting a car loan has been made simple through online application. This trend has made it possible for many individuals to easily access car loans. With proper documents and paperwork, some financial institutions even offer 100% financing to buy a car.
The paperwork involved in the application process has been made simpler in the recent days. Still, it is necessary for an applicant to submit a list of documents in order to avail car loan. The car loan documents required are pretty much the same for most financial service providers. The documentation process is usually simpler for salaried professionals. For self-employed individuals, some additional documents such as income tax reports are required in order to successfully avail car loan.
Financial institutions seek various documents from loan applicants mainly to verify their credibility and financial stability. Thousands of people apply for car loan everyday. The financial stability of applicants vary from one person to another. Most lenders including banks and financial institutions prefer to offer loans only to creditworthy individuals. They typically validate this information by verifying the documents submitted by a loan applicant. Once you have submitted all the required documents, these financial institutions conduct a check on the applicant’s credit score and financial position.
If your credit history is good, you can enjoy quick disbursement of car loans without any hassles. On the other hand, people with bad credit score may face certain restrictions from the lender. The lender may sometimes require additional documents like mortgage details, credit card statements, etc. before approving the loan. The lender may also charge higher interest rates for people with bad credit history. In certain extreme cases, poor credit history may lead to the outright rejection of a loan application. Considering all this, paperwork and documentation is one of the major steps that you cannot skip during the car loan application process.
The following documents are typically required for salaried professionals when they apply for a car loan with a financial service provider.
Identity proof - An identity proof is any official document with the applicant’s photo identity in it. Generally, copies of various documents such as Aadhar card, PAN card, driving license, passport, voter ID, etc. can be used as identity proof.
Address proof - Any official document bearing your correct residential address can be used for this purpose. Many official documents such as Aadhar card, passport, driving license, voter ID, family card (ration card), utility bill, etc. can be provided for this proof. The applicant’s name must be present in the ration card or utility bill when these are used for submission.
Age proof - Many banks and lenders require age proof along with other documents. Some of the acceptable age proof documents include birth certificate, school transfer certificate or marksheet, Aadhar card, etc.
Income proof - Proof of income is a must for salaried individuals. Only by establishing proof of income, an individual can prove that he or she is capable of repaying the car loan. Most banks seek at least three salary slips from the applicant to establish income proof.
Bank statement - This provides further proof of financial stability and income from the applicant. Financial institutions may ask bank statements for 3 months to 6 months depending upon their internal requirements. Make sure that the bank statement you provide is for the account in which you receive your salary.
Signature verification proof - This is mostly used by banks to verify the signature of the applicant. Banks have a separate forms for applicants to fill up along with their signature.
Proforma invoice - This contains the price quoted by a dealer for the car chosen by the applicant. The loan amount will be based on the price of the car.
Most of the proofs required for self-employed individuals are the same as that of salaried individuals. However, banks may require some additional documents to validate the creditworthiness of a self-employed individual. For salaried professionals, the income is credited regularly every month. Monthly income is not something that is consistent for self-employed professionals. Hence, these additional documents are required to establish consistency in the annual income of the self-employed individual.
Identity proof - Any documents with photo identity including Aadhar card, PAN card, passport, voter id, driving license, etc.
Address proof - Any official document that carries the residential address of the individual. This includes Aadhar card, passport, voter id, driving license, ration card, utility bill (telephone, electricity, or water), etc.
Age proof - Birth certificate, school transfer certificate or marksheet, Aadhar card, etc. to establish the age of the applicant.
Bank statement - Bank statement for 3 months to 6 months to establish the financial soundness of the individual.
Business ownership proof - Office address, maintenance bill, or utility bill to prove that the business is under operation. Moreover, the applicant must also provide a copy of the business registration license.
Proof of income - Income tax returns for up to 2 years is required to prove that the individual is paying taxes to the government. In addition, other documents like audited balance sheet and profit-loss statement must also be filed with the lender.
Signature verification proof - This is required to establish the correct signature of the applicant. Most banks have separate forms to prove the signature of the individual.
Proforma invoice - A proforma invoice containing the price of the vehicle must also be filed along with the other documents to indicate the desired loan amount. Most banks offer up to 95% of the car’s price as loan.
A filled up application form must be provided along with all the other documents listed here. Photograph of the applicant is needed in both cases.
These are some of the documents required while applying for a car loan. It must be noted that the car loan documents required may vary among financial institutions. Most banks provide the list of required documents in their official websites. If you are not clear about the documents required, you can contact the bank’s customer service or visit the branch and enquire about the documents required for car loan application. It is also necessary to make sure that all documents are up to date and relevant. Once these documents are submitted with the financial institution, the documents will be verified and the application process will be initiated.