In today’s time, a car is not merely necessary. It is a key element of life and a status symbol. The automobile industry has cars for all budgets in different segments. Buying a car requires one to shell out a considerable amount of money from their pocket. But living without a car in today’s time means cutting down on your leisure, work or other commitments, and also having a face down in a social circle. But the ever-increasing process of the cars limits one to splurge their savings on it. Either you are opting for a new car or a used one, taking a car loan is the best possible option. Though some people tend towards personal loans for the purpose, the rate of interest charged on it is considerably higher than car loans.
A car loan is a perfect way to finance your car without hampering your savings. The Indian finance market is full of leading banks and NBFCs offering car loans at competitive prices. One can pay back the loan in easy monthly installment.
BENEFITS OF TAKING A CAR LOAN
Car loan takes care of the finances which are required to buy the car. Instead of checking out all the money from your savings, it is advisable to take a car loan. Being a secured loan wherein the collateral is the car itself, one doesn’t really have to put any other asset for taking a car loan. A car loan can be used for paying for the car and use it while you are servicing the loan tenure. As the loan tenure gets over, you own your car and also have your savings intact. This also helps in bettering your credit history when you pay back the car loan in easy regular monthly installments. Car loans thus are safer and most sought after options to finance a car.
CAR LOAN FEATURES
- Car loans are available for both new and used cars. One can opt for one on the basis of their requirements and needs.
- A car loan is approved quickly and therefore gives an opportunity to the people who are seeking to purchase a car a little over their budget.
- The rate of interest offered on car loans is fixed with repayment done through equal monthly installments. The EMI can be defined as per one’s comfort so that the monthly budget is not hindered and the car loan doesn’t turn into a burden.
- Usually, banks and financial institutions offering the car loan gives the option of flexible loan tenure of 1-7 years so that the borrower can pay back easily in monthly installments.
- In comparison to other loans, car loans are easy to procure with minimal documentation, quick approval and disbursal.
- One can avail car loan up to Rs. 1.5 crores. This usually involves the complete on-road price of the car.
- Car loan lenders offer flexible loan tenure and options of easy EMI.
CAR LOAN FOR A USED CAR AND A NEW CAR
Car loans can be availed to buy a new car or a used car. A used car is usually cheaper in comparison to a new car and therefore loan required will be lesser. However, with second-hand cars, the user needs to bear re-registration charges and upkeep cost which are generally not covered in a car loan. Car loan approval for a new car is faster than a used car. But, taking a car loan for a used car is also a good option because:
- Used cars are easy on the pocket and a car loan for them will have a lesser loan amount and eventually lesser and lower EMIs.
- Car loans for used cars are available as a customised product by many banks.
- Car loan for a new car is dependent upon the on-road price and model but the scenario is different for used cars. One can avail the same amount of loan for getting a higher model in used cars. Also, the cost of insurance in used cars is lesser than the ones for new cars.
To avail a car loan, one must fulfill the basic eligibility criteria which include:
- Age: The borrower should be aged between 21-65 years
- Nationality: The borrower must be an India residing in or out of the country.
- Employment status: The borrower can be salaried, self-employed, professional or a business owner.
- The applicant must meet the minimum salary requirements or minimum repayment capacity.
- Applicant must be in his present job for at least one year (salaried). Self-employed individuals must be in the same business for at least two years.
With documentation in place, the car loan process gets faster. It is thus important to keep all the relevant documents viz. identity proof, address proof, income proof and documents related to a new/used car.
- Duly sign and fill the application form.
- Passport Size Photographs of the applicant
- Identity proof- Passport, Pan Card, Driving License, Voters ID card, Aadhaar card or employee identity card in case of government employees
- Address Proof - Bank statement, Rent Agreement, Voters ID card, Ration card, Passport, Driving License, Telephone bill, Electricity or water Bills, Credit card bill or Property tax document
- Age Proof - a Voter ID card, Secondary school leaving certificate (class 10), Birth certificate, Passport, Aadhaar card, Pension payment order or Receipt of LIC policy.
Income proof documents
- Last 3 months' salary slips
- Form 16 with proper computation of income
- Last six months bank statement of salary account
- Latest acknowledged IT return
- Business stability and ownership proof
- Last two years' computation of income
- Profit and Loss statement
- Balance sheet certified by a C.A.
- Last six months' bank statement
- Last two years' sales
- Copies of acknowledged IT returns
- PAN Card
- Documents with Vehicle information - sales receipts from the seller. Copies of Vehicle's Motor Insurance and your Driving License are also required.
CAR LOAN INTEREST RATES
The car loan interest rates are guided by the RBI directives but still one can find a little variation from one lender to another. A car loan is also guided by factors like loan amount, tenure, credit score and your equation with the lending bank. Presently, car loans rate of interest varies between 10-15%. But some banks also offer a little less rate depending on one’s negotiation.
GUIDE TO CHOOSING THE RIGHT CAR LOAN
- Do your research: Before zeroing on the car loan lender, it is very important to do prior research about different lenders and the rate of interest and loan tenure terms and conditions offered by them. Fintechs like LoansJagat offers an excellent platform wherein the applicant can compare different lenders for their offerings and make an informed decision thereafter.
- Calculate EMI: LoansJagat portal offers an ultimate online tool –EMI Calculator using which you can calculate the number of monthly installments you can easily afford. Also, it is important to take into account the rate of interest as it affects your monthly installment considerably. A lower rate of interest means lower EMI.
- Stay true to your budget: The marketing team at the car showroom are well equipped to trap you in exceeding your budget for buying a car. Be true to your budget and don’t flow into their marketing gimmicks. Always remember that car loan like any other is a big responsibility. It is a liability which must be paid off on time.
- Account for processing fee and other charges: Car loans often come with processing charges and other hidden costs which must be taken into notice on time.
Thus, before committing oneself to a car loan, it is very crucial to do thorough market research for the best loan product. Whether you are buying a new car or opting for a pre-owned one, it is important to note that a car loan is a liability which is a paid off duly on time. Deciding on a budget and sticking to it is another very important aspect to be considered while opting for a car loan otherwise the car loan will end up as a burden. Avoiding such mistakes can help you with a smooth car loan experience.