Next comes the assessment for loan. The bank accesses the CIBIL credit score of the prospective loanee, after getting some amount deposited with the bank as ‘processing charges’. Once the bank ascertains that the CIBIL score is favourable, the process note gets prepared for sanction.
Sanction and Disbursement
The bank issues a ‘letter of sanction’ stating the terms and conditions of sanction, covering aspects such as amount sanctioned, interest rate, EMI, period of loan and margin required to be deposited. It also contains information on service charges, depositing of postdated cheques (PDCs) covering the period of loan, etc. Once the bank documents evidencing the loan for purchase of car are executed by the client, the loan amount is disbursed by means of a pay order
Once the loan account is opened, the postsanction formalities begin. The delivery of the car is followed by a bank official’s visit for them to record the registration number of the vehicle as also the date of physical inspection of the car. The copy of the insurance policy is also to be delivered to the bank, and is kept with the relevant loan documents. This insurance is to be renewed every year at cost to the borrower till clearance of the loan. A copy of the RC is also kept with the loan documents.