Lowest Interest Rates – Calculate EMI – Check Eligibility – Instant e-Approval – Special Offers
Keeping pace with the changing demands and maintaining a certain quality of life can be challenging. In this pursuit of life, having a car of their own is a wish that many people keep close to their hearts but might not be realizable without aid from financial products like a car loan. The available car finance facilities make it so that you don’t have to curb your wish of buying a car, whether it be for convenience, quality time with family, or just fulfilling a yearning of yours. Before diving deep into the mechanics of a car loan and how you can benefit from it, here is what it means.
If someone does not have the resources of purchasing a car right away, they can opt for a car loan to finance the buy that will allow them to repay the loan in monthly installments. It is a common type of personal loan where you are basically borrowing the funds from a financial institution and paying it back through Equated Monthly Instalments (EMI) with interest over a specified period called the loan tenure. The forms in which car finance is offered to the consumers by Banks and Non-Banking Financial Companies are New Car loan, Used Car loan, and loan against car. The loan amount one gets varies from person to person depending on certain factors like their income, credit score, and many more.
This type of loan is available for the purchase of brand new cars, which since being worth more than older models, helps facilitate the negotiation of competitive interest rates. For most models of cars in the market, a new car loan is available. The interest rate at which new car loans are offered is 9-14% p.a for a loan tenure ranging from 1 to 7 years.
Another type of loan is a used car loan used for the purchase of cars that don’t qualify for a new car loan due to being too old as they have been pre-owned or used for less than 5 years. It contracts an interest rate higher than its counterpart of around 12-18% p.a for a loan tenure of 1-5 years owing to the car’s decreased worth. The loan offered by financial institutions can be up to 80-85% of the car price.
Another way via which one can fund the purchase of their new car is by pledging their old car as the collateral, also known as a loan against car. The interest rate can range from anywhere between 14-15% p.a. for a loan tenure of 1 to 3 years where the loan amount offered can be up to Rs. 10 Lakh or 100% value of the car.
Car loan refinancing is one option that allows you to replace your existing loan with a new one from another lender. Since you are taking the trouble of replacing the loan, it must have its own merits. The loan features, benefits, and terms will get renewed when you choose to go for financing. It can prove to be beneficial for lowering interest rates, modifying your loan tenure, changing the loan terms, and modifications to a co-signer agreement. The key points associated with refinancing that one should consider are:
This type of loan is offered to organizations, partnership firms, and self-employed individuals, and is availed by borrowers to purchase commercial vehicles like buses, trucks, and tankers to be used for business purposes. Most of the leading and prominent banks in India provide commercial car loans at low interest with fast and easy documentation and approval. There are three types of commercial car loan – a New Commercial Loan for the purchase of new commercial vehicles for business purposes, an old commercial vehicle loan offered for the purchase of pre-owned or used commercial vehicles, and commercial vehicle refinancing wherein the bank offers a loan on a loan-free existing vehicle or provide additional finance on an existing commercial vehicle loan.
For choosing the most suitable car loan offer, it is imperative to understand the features which constitute a car loan.
It will vary depending upon whether the car you want to purchase is new or old. For the former case, the loan amount would be higher, while the latter case will warrant a lesser loan amount due to decreased worth. Loans offered by banks for a new car can be up to 85-100% of the car price, but on the other hand, an old car will draw a car loan of only up to 70-80% of the car price.
Loan tenure is the time period specified to the borrowers by the lender for the repayment with the applicable interest, which is determined based on the age of the car and the loan amount. You can go for either short or long loan tenure depending upon how much you are comfortable in paying as EMI and until when.
Over the chosen loan tenure, you will incur interest on the principal loan amount payable every month. It will vary according to the bank you choose, so searching for the best offers can reap you some benefits.
In some cases, you might be expected to make an upfront payment of a certain amount wherein you only have to borrow a loan amounting to the balance price of the car. This initial amount payment via cash, demand draft, cheque, and electronic transfer is called the down payment.
Equated Monthly Installments or EMI are how your car loan is repaid to the bank. The amount that one will be paying as the EMI is dependent on the loan amount and loan tenure. A loan of shorter tenure will recruit a higher EMI in comparison to a long tenure loan.
A small amount of the principal is charged as the processing fee by the banks to process a car loan. sometimes, the processing fee can be waived off as a part of a special offer by some banks.
One will contract a prepayment fee, some percentage of prepayment amount if they wish to prepay a part of the car loan after making 12 EMI payments. Preclosure is when you pay the loan amount in full before the end of the loan tenure.
In case you were to default on your car loan, your car pledged as the collateral will be repossessed by the bank, which can then put it up for auction to compensate for outstanding dues.
The eligibility criteria can vary depending on the bank.