The term refinancing means the process of getting a new loan that will be used to pay off the existing loan. There could be many reasons why people go for auto loan refinancing. For instance, if your credit score has improved, then you can consider refinancing option as it will reduce your interest rate and monthly installments. In case you are facing trouble paying off your monthly installments, then refinancing can certainly come to your aid.
However, here is the step-by-step procedure to apply for car refinancing in India.
Keep your Documents Handy
You will need some document before you apply for a refinance of a car loan in India. The essential and basic documents required are:
- Latest payment stub of your ongoing car loan that has details like, the remaining amount of time to repay the loan, the interest rate, etc
- Your Driver License
- The Vehicle registration certificate
- Recent salary slips from your current employer
- Your Aadhar Card
- Your PAN Card
Evaluate your Credit History
Credit history plays an important role when it comes to refinancing an auto loan. If you have paid all your loan dues on time for a year then your credit score will improve, and you will get the benefit from a car refinance. So, before proceeding for it, check your credit history online.
Compare among Different Companies
Study several auto loan refinancing companies, so that, you can compare car loan interest rates in India. This way you can find the best car loan in India and reap benefits out of it. The comparison procedure will help you to evaluate which lender is offering the lowest loan interest rate, as it will lower down your EMI as well. Hence, this step becomes an integral part of the refinancing process.
Take the Right Decision
After getting quotes, you should be able to calculate whether the car refinancing will save your money or not. Many a times, banks come with attractive loan offers at a lower rate of interest and going for a refinancing option can save you a lot of money.
But in some cases, the difference in the rate of interest might be small and if you are nearing the end of your loan tenure, the car loan refinancing will not prove to be a good decision.
At the end…
Although, there are some benefits to refinancing but there are some downsides as well which you should consider if you are looking for a car loan in India. Some of the downsides of refinancing are as follows.
When you apply for a refinance, it is marked in your credit score as an inquiry. If a person applies for a car loan refinance multiple times in a short period of time, then automatically the credit score will come down. So, avoid applying for a refinance if you need a home loan or some other loan. You might have to pay a higher rate of interest on your home loan if your credit score is down.
When a person is experiencing a hard time paying off the monthly installments, he could consider the option of a car loan refinance. But a temporary relief can become a burden in the future if the refinance loan has a long tenure and a high monthly EMI’s.
After considering the advantages and disadvantages of the refinance, if you still want to apply for a refinance, the option is always open for you.
Sneha Sharma is a writer currently associated with Droom Technology. She writes about various topics such as auto news, trends in the automobile industry, auto finance and so on. She has a prominent existence and well participation on different social media platforms.