A Car Loan is loan, which is provided by any banks/financial institutions to individual to get their dream car. Unlike traditional days, car is no longer the symbol of status or any luxurious commodity, now it’s became common to buy car in middle class people in India. With the popularity of car loan, many banks /financial institutions offer car loans to the individuals who have good credit history. Car loan, invests in a depreciating assets, which means the asset bought using this loan is in fact will cost less over time.
Yes, a car loan can be applied for used cars. But, the car loan interest would differ in case of pre used cars. This car loan will help you only to buy the car, other expenses such as transfer of registration, etc.; will have to arrange by yourself.
Car loan is secured loan, in car loan, car itself acts as a collateral. Therefore, it doesn’t require any extra collateral for applying a car loan. However, you need to get the RC of the endorsed car with a bank. This car endorsement is cancelled after repayment of the loan is completed.
Generally, the maximum amount of car loan, a person can get depends on the type of car candidate want to purchase such as pre owned car or car taken directly from the showroom. The amount of car loan sanctioned is also depends on the type of bank/financial institutions you are applying for. Some bank provides 80-90% of car loan and in some banks they provide full amount based on your capability and other factors.
The type of documents required for car loan differs from lender to lender. But some documents are common for any car loans such as: Income certificates ( payslips/ last acknowledged ITR) Identity proof Address Proof Other documents required differ from lender to lender.
The time period for car loan depend on the amount of EMI you are ready to pay, it varies from 1 to 5 years. Some lenders are also providing time period of 7 years for repayment of car loans. Higher the amount of EMI you pay lesser will be the time period, similarly if you are paying less EMI then time period will increase also the amount of interest for high time period will be high.
Generally, the salary range for applying car loan is not same at every bank/financial institutions. However, every lender bank/financial institutions set some margin that needs to be reached by the borrower if, not the loan will not get sanctioned. Otherwise, you can add a co-borrower for applying loan that will add weight for your application. The Co-borrower must belong to your family member/spouse/blood relation.
It’s not necessary for any car loan applicants to have a co- borrower. It’s required only in the case, when the applicant unable to meet the criteria set by the lender that may be because of age, salary, credit score, and others. Otherwise, any individual can apply for a car loan.
The car loan will be cancelled only in the case of- if an applicant can’t meet the minimum criteria set by the lender for applying that loan- such as age, salary, income level, credit history, etc.; or if you have already applied for a car loan and it could have rejected because of any of the reasons. In this case, only adding co-borrower in your application will help you that too your co-borrower must have good credit history and meets the eligibility criteria.
No, unlike other loans like home loan, car loan don’t have any tax benefits. Therefore car loan is always included in your real requirement and splurging on a lavish car by taking a high amount of loan is not a good idea.
Yes, you can negotiate your car interest rate, if you have good credit history with the lender. If the previous loan taken from same bank has good credit history, then the chances of getting lower interest rates for your car loan may be applied.
As per the RBI directive, banks are using MCLR from April 2016, banks are making use of marginal the cost of lending rate (MCLR) to fix the interest rate on different types of loans including car loan. Currently MCLR car loan rates are slight lower than the car loan rate used earlier. However, modification in CRR margin, deposit interest rates and bank operating expenses will change the MCLR and by enhancement the interest rates offered on car loans. Moreover, as per the new rules, banks are needed to revise their loan interest rates half yearly or yearly basis.
Does Car loan cover the amount which you have to pay for insurance or registration at the time of buying?
No, Car loan doesn’t cover the insurance or registration fees. You have to purchase the car insurance and registration separately as it’s not covered in your car loan. However, there are some lenders, who offers this under some special schemes.
Car Loan prepayment option is offered by some lenders, but you can do after some tenure of the car loan is completed, also you have to pay some penalty along with prepayment according to the terms and conditions. The prepayment penalty ranges from 1%-4% of the car loan you have taken. Also, you need to confirm all the relevant charges with a bank before prepayment of the car loan.
No, no lender will allow you to sell your car, before the repayment of the car loan. Because, before selling a car you required a NOC from the bank also you must have to get the released documents of the car from a bank. And that you can get only after you have paid off the total car loan.
When you provide the ECS (Electronic Clearing Service) mandate to the lender, the lender automatically deducts EMI amount from your saving account. Or you can do it by giving posted dated cheque to lender when registering for the car loan.
Generally, banks treat you as the defaulter, if you’re not paying EMI on time or missed some EMI. You will be charged with a penalty fee and notified to regularise your payments. If you fail to regularise your payments for a long period of time after continuous notifications, the financial institution can legally repossess your vehicle. Also, it will effect on your credit history. And you may face in difficulty in getting any loans in future.