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What Are the Checks Done for Car Finance?

You might have been eyeing a car for a long time. But the price tag is keeping you from making the purchase. But your dream car can now be yours, thanks to car financing. Car financing allows a person to divide the total cost into equal parts. They can pay the amount at a set interval every month. It helps manage their finances while also fulfilling their car ownership goal. 

All banks offer car financing options, although the interest rate can vary from person to person. Moreover, banks conduct different checks before granting a car loan, and based on the outcome, the amount received can vary. It is a simple process, but to avail yourself of it, you should know all about the documents and checks before getting car finance.

The basic car finance documents

The standard documents required during the car finance process are outlined below. 

Proof of identity

The first document you need to provide is your identity proof. This will assure the bank or the lender that you will not cause any fraud. This is usually done by filling out a form where you need to fill in basic information like your full name, birthdate, residential status and also marital status. They will also ask for some government-issued identity like the Aadhaar card or PAN card, which bears all the details you have provided in the form. This will ensure that the details are accurate. 

Proof of residence

The next set of documents includes an address proof for the previous three years of residence. This does not mean that you have to own a house. This helps them understand that you are a credible borrower and are not hiding any vital information. This can include:

  • Two utility bills in your name
  • Bank statements

It is important that you provide the most accurate information on the car finance process. A slight mistake can cause the application to be rejected. 

Credit history

Credit history helps determine whether you can repay the loan without defaulting by indicating your level of financial stability. This judgement significantly influences the approval of funds and affects the interest rates for which you qualify. Lenders will use their own systems or third-party credit agencies to verify your financial situation.

They will assess your CIBIL score, which is a three-digit number indicating your credit history and management. A good credit score indicates that you are responsible for your borrowing and repaying credit on time. If it’s poor, the corporation will charge a higher interest rate to offset its lending risks. If it is good, you’ll be offered an attractive rate of interest. 

Bank statements

This is a continuation of your credit history. The bank or lender will examine your bank statements to ensure that you will value the loan and not default on it. They will verify the statements and find out if you have sufficient funds to avoid defaulting on EMIs. To determine the interest rates and whether to approve or deny your loan, they will review your bank statement and income and expenses.

Employment history

The lender will also check whether you are employed to determine whether you are economically capable of paying the EMIs. This is valid for both employed and self-employed individuals. Your income and employment title must also be mentioned.

If an applicant is paid on a salary, they will need to submit a copy of their employment letter, Form 16, and most recent pay scale. The lender may request the name and complete address of your last three employers when you apply for car finance. This will help them decide whether you can continue working and making money until all of the EMIs have been paid back. 

The lender will typically need previous bank statements to verify your income if you work for yourself. In the case of the latter, they will ask for a summary of accounts of the last three years. Self-employed people will also need to provide a current bank statement, a balance sheet, a profit and loss statement, and a pertinent government certificate in order to validate their business. 

Driver’s licence

One of the most important checks before getting car finance is your driving licence. While some lenders will make loans to borrowers with temporary licences, the majority require that you possess a valid, complete Indian driver’s licence. You will be required to submit a copy of your driver’s licence throughout the application process, and the lender may get in touch with the DVLA to confirm the accuracy of all the credentials. They will verify that you are of legal age and possess the necessary driving skills. Most banks will reject your application if you do not possess a driver’s licence.

When do the credit checks before getting car finance occur?

When you request an estimate or attempt to determine your eligibility for car financing, a soft credit check is done. Although it doesn’t impact your credit score, it gives the lender enough details to determine how you manage your loans and what kind of borrower you have been.

If the information you’ve submitted satisfies the conditions set forth by the lender, you will be granted preliminary approval. However, preliminary permissions are non-binding. It can be a positive indication that you will be approved for a loan, but the outcome of your application will still depend on factors like the documents you submit, the kind of car financing you choose, and the kind of car you want to buy.

What is the time taken for finance approval?

Typically, a car finance application is examined in a span of one to two working days. One of three things will occur following the completion of the checks: 

  • Your application has been accepted. Upon approval, the contract will be activated, and the funds will be sent to the authorised dealership or broker. 
  • Your application will be rejected. The bank may have rejected your application because your credit history was poor or your credentials do not match the requirements. 
  • The lender will need more details. If this happens, it suggests that your application is being considered, but further information is required before a decision is made.


While car financing is a great and viable solution, it is important to have proper knowledge about the car finance process and the documents required. Make sure you have everything ready for the checks before getting car finance, and provide accurate information at every step. Assess your financial situation and choose a bank whose interest rates align with your goals and experience smooth car ownership.


How do I choose a bank for a car loan?

Car loans are available now from every bank in the nation. Therefore, as a borrower, you should compare interest rates and other costs when you search for a bank to finance your vehicle.

What is the CIBIL Score required for car finance?

It is good if your CIBIL score is higher than 600; nevertheless, a score of 750 or more is seen as more favourable.

Can I receive a car loan if my salary is ₹30k?

Banks and other lenders typically offer car loans three to four times your annual income. For example, you can typically obtain a loan of ₹10 lakhs to ₹12 lakhs to purchase a new car if your monthly income is ₹25,000.

Does a car loan require Form 16?

Form 16 serves as evidence of the loan applicant’s ability to repay the loan because it offers a thorough summary of the applicant’s income.

Can an unemployed person get car finance?

Some banks may approve a car loan to an unemployed individual if the latter can provide credible proof of an alternate source of earning. This can be a hefty fixed deposit or pension. In this case, the credit score becomes extremely important. 

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