In ancient times, people traveled with their feet or via animals like horses, donkeys, and many more. As time passed automatic vehicles got invented according to the requirement of people. Now, we live in an era, where buying a car is the dream of many, but not everyone has the required amount to purchase it. As more people want to have private vehicles, especially cars, banks are taking this opportunity to provide loans to help people which are known as auto loans.
What is an auto loan?
It is one of the most popular loans, given by almost every bank in this world. It is given to the person who wants to purchase a car, even if it is a second-hand car or the new one. It has a different interest rate in different banks but most of the time it depends on the credit score of the person who is buying a car. You may also get an auto loan at 0% interest if you maintained the best credit score in your bank earlier.
What is the process involved in applying for an auto loan?
- The first step is to carefully check the terms and conditions provided by different banks and then select the one that seems reliable and secured. Fill up the application form with all the necessary information that is asked for.
- After that, the second step is the verification of the documents.
- The bank will approve the loan if your documents are reasonable, sound accurate, and the person can pay back the loan in a specific period. It takes 3 to 4 days to approve the loan amount.
- Lastly, the person gets the loan to buy their desired vehicle.
Is it worth taking an auto loan?
Now the question arises is that, whether it is worth taking an auto loan or not. If the person does not have enough money to purchase a car loan is always his priority to buy it. In short term, it looks fruitful but in long term, it has its drawbacks. Some factors need to be considered before taking an auto loan.
First of all, if a person wants to own an INR 10 lakh car, he has this money in his account. He might consider taking a loan from a bank if he can earn more money by investing the cash, he has in his bank account. For example, let’s presume a person has INR 10 lakh in his account and he is taking a loan from a bank to buy a 10-lakh rupee car and paying 12 lakhs back to the bank after 5 years. Then he should at least need to earn 13 lakhs, from that 10 lakhs cash he had by investing.