Introduction
India is undergoing a transformative phase fueled by new economic policies and cutting-edge technologies like UPI. With widespread internet access and a phone in every pocket, a new era of aspiration and hard work has emerged. Venture capitalists are increasingly placing their bets on this rising tide of New India. As consumption rises, the demand for amenities grows, paving the way for new opportunities.
The most recent data from the Reserve Bank Of India indicates a notable change in borrowing patterns. More individuals are now choosing vehicle loans over home loans. With cars and SUVs taking up a larger part of consumers' expenses, the demand for vehicles has risen, surpassing the traditional preference for owning a home.
According to the RBI, bank-issued vehicle loans have seen a remarkable 137% increase in the last three years, amounting to Rs 5.08 lakh crore. This surge in vehicle loans places them as the second-largest loan category, coming right after home loans in terms of loan amounts per customer.
Notably, vehicle loans make up a significant portion of banks' overall personal-finance lending, accounting for about 12% of total lending in recent years and around 10% in previous years.
Traditional banks and financial institutions have faced challenges with slow processing times, impacting business volume and customer satisfaction. This post delves into the details of auto loan processing, the encountered hurdles, and showcases how Vaultedge’s digital lending solution can assist banks in handling this demand more efficiently.
Understanding the Current Auto loan approval process
The auto loans market in India offers attractive interest rates and a repayment tenure of up to 8 years, with some lenders providing up to 100% of the on-road price as a loan. There are various car loan products available, including luxury car loans, loans for professionals without income proof, small loans, low-interest rates for new and used cars, and long repayment tenures.
Applying for a car loan can be done offline by visiting a bank branch or online through the lender's official website. The process involves submitting necessary documents for verification.
Eligibility criteria usually include providing -
- ID proof,
- Address proof,
- Proof of income,
- Credit history,
- Vehicle information,
- Insurance proof
- Driving license.
Lenders assess these details to determine your repayment capability, creditworthiness, and adherence to legal requirements. Pre-approved car loans may be available for individuals with good credit scores, streamlining the application process. However, the extensive documentation and verification procedures can make the loan approval process lengthy and time-consuming.
Auto Loan Approval Timelines: Statistics vs Real-life Scenarios
According to the State Bank of India's website, the standard processing time for a car loan is estimated at 3 days. However, the actual process differs significantly. While it's true that banks provide pre-approved loans that can be disbursed within minutes, the current economic boom in India, coupled with increased disposable income and ambitious spending habits, presents a unique challenge. Individuals, driven by instant gratification, aspire to own their dream car promptly. Despite this, many lack the necessary credit history or pre-approved loan eligibility. These intricate cases, often involving borrowers with high aspirations but limited creditworthiness, require a more thorough evaluation by banks. The evaluation process for such complex cases can extend up to 5 days, especially when compounded by the surge in demand for auto loans.
Navigating the evolving landscape of auto loan approvals is a demanding task for loan officers. Customers, accustomed to a world of abundant choices and expedited services, anticipate swift decisions akin to a 10-minute grocery delivery. In practice, the timeframe for loan approvals can vary significantly based on the complexity of the case:
- Instant or pre-approved loans: Typically processed within 30 minutes to 24 hours.
- Standard car loans: Processed within 24 to 72 hours.
- Complex cases (involving poor credit or high loan amounts): The evaluation period ranges from 72 hours to 5 days.
Solution to Tackle Complex Cases
To address the time-consuming nature of handling complex cases, the initial step is to pinpoint the specific challenges that banks and NBFCs encounter in processing such cases. The two primary issues identified are sluggish decision-making and a lack of ongoing financial monitoring.
- Slow Decision-Making: Banks and NBFCs currently experience prolonged decision-making processes for auto loan applications, often extending over days or weeks. This leads to the potential loss of valuable customers seeking prompt financial resolutions.
- Lack of Continuous Financial Monitoring: Following the disbursal of funds, there is a failure to verify data accurately, and manual document checks further prolong the procedure. Understanding these challenges is crucial before delving into potential solutions.
- Poor Credit Appraisals: Manual appraisals for existing customers are time-consuming & error-prone, which leads to lapses in credit risk assessment.
This challenge can be addressed effectively with the assistance of AI and Machine Learning. By extracting reliable data from the GST website and conducting comprehensive analysis, Vaultege Lending API excels in this area. Vaultedge, a leading player in the Document processing sector in the US Market, comprehends the intricacies that loan officers seek. Their innovative GST/ITR API retrieves financial data from government websites and performs a detailed analysis based on the Banks' risk Models. It provides a concise summary of the data, identifies risks, and facilitates continuous monitoring.