Today, a car loan is a staple for buying a car. However, before you go car shopping, spend some time to analyze figures and facts. Taking a car loan is not only a tiresome process but also a complicated one. Hence you should prepare a set of questions for your auto finance lender to make an informed financial decision. You should also research about the auto finance lender to make sure they do not indulge in malpractices. Here are some questions that you need to ask your auto finance lender before signing on for a car loan:

1. What is the interest rate charged for the car loan?
The first and most important question you are supposed to ask your auto finance lender is the interest rate. There are a lot of banks that provide low interest car loans. Usually, long-standing customers of a bank get loans at a comparatively lower rate. In some cases, auto finance lenders provide loans at an interest rate starting from 3.99% to 12% APR depending on your credit score. The better your credit score is, the lesser your interest rate tends to be.

2. What is the total amount being financed by the bank?
It is recommended that you should pay around 20% of the total car price on your own. The balance amount can be financed by the lender. However, there are many banks that provide loans that can pay 100% of the price of the car at ex-showroom rates. To be safe, you should follow the 20% rule. The 20% rule also states that you should not take a loan that requires more than 20% of your income to be given as repayment. Paying a high amount in each EMI can have a big impact on your finances.

3. What is the final price I will have to pay for the vehicle?
Even if you manage to get a loan at a low interest rate, some auto finance lenders can charge you high amounts for documentation, foreclosure, processing, prepayment, default in payment, and late charges among many others. This elevates the total price you have to pay for the car. Hence, you should confirm the final amount that you will have to pay during or after taking the loan. You should evaluate aspects like tenure, principal amount to try for a lower interest rate and reduce your total cost.

4. What supporting documentation do I need for a car loan?
Even though your credit score shows your reliability, an auto finance lender will most likely ask for additional assurance that he/she will get their money back. This documentation will show whether you are financially stable to repay the loan. Here are the documents that an auto finance lender will ask you to present:

• KYC documents to verify age, address, and identity
• Financial and credit history
• Proof of income
• Proof of insurance
• Information of vehicle

If you have these documents with you during the application process, your loan approval process will be much easier.