Components Of Car Loan
- Tenure- The tenure of the car loan is its length. It denotes the number of years which you will require for repayment of car loan. The longer you will take in repayment of loan, the more you will be required to pay as interest.
- Rate of interest- The interest rate is the percentage of the car loan which you will be charged for borrowing the money. The credit history of the applicant plays a crucial role in deciding the interest rate.
- Down payment- It is the amount which you can afford to pay at the time of buying the car. If you will make large down payment then you will be required to take less loan.
Eligibility Criteria For Car Loan
- Age criteria- In case of salaried individual, the person should be above 21 years at the time of filling the application and up to 60 years at the time of loan maturity. For self-employed individual, the minimum and maximum loan age is 21 years and 65 years, respectively.
- Income- Minimum net salary of at least Rs 1.5 Lac per annum for selected models and Rs 2.5 Lac per annum for others.
- Employment- In case of salaried individual, the total employment stability should be above two years and current employment stability of minimum 1 year. For self-employed individual, business stability should be over three years.
Documents Required For Car Loan In India
There are several documents which are required to establish your identity, income and residence. Even if you are eligible to get a loan, without proper documents, you cannot get your loan approved by the lender.
- Salaried applicant- Latest salary slips along with Form 16 of last two years.
- Self-employed applicant- Income Tax Returns of last two financial years.
- Partnership firms, societies & companies- Income tax returns of last two financial years along with complete financial/audit report.
- Other documents- Identity proof, signature proof and address proofs.
Service Charges Involved In Car Loan
- Processing fees
- Stamp duty
- Foreclosure charges
- Charges for late EMI payment
- Amortization schedule charges
- Cheque bounce charges
- Statement of account charges
- Issuance of credit report
Car Loan Application Process
- Do the enquiry with a lending institution- Firstly, you should get in touch with lending institutions and ask them to offer you some loan quotes. Then you should negotiate with them in order to get best deal on interest rates. Check to find out whether there are any other special offers or not. Then select the best lender by making a proper comparison of information which you have gathered from varied lenders to crack the best deal.
- Collection of documents- Once you select the lender, their direct selling agent will visit you for collecting documents in support of your residence proof, income proof and identity. You may be required to give photocopy of income tax returns, salary slips, passport, bank statements, driving license and varied other relevant documents. Here, you should note that documents required may differ from one lender to other.
- Visit of field investigation agency representative- After the submission of documents, a field investigator will visit your home to check the validity of facts provided by you, such as place of residence, job tenure and many others. Make sure that you are present during your visit to clarify any question that might come in the mind of investigator. Otherwise, the investigator may go back with unclear facts, which can force the lender to deny your loan application.
- Approval of loan amount- Once the lender will be satisfied with the authenticity of documents, the car loan will be approved. The lender will disburse the loan amount through cheques or by giving demand drafts.
Different Types Of Car Loans In India
- Car loan with fixed interest rates: As the term itself suggests, in car loan with fixed interest rate, the interest rate does not change throughout the loan tenure. There are varied banks in India that are providing different interest rates; therefore, it is advised to compare available car loan rates.
- Car loan with variable interest rates: In this type of car loan, the interest rate does not remain fixed and it keeps on changing during the loan tenure. The terms and conditions of the variable interest will be decided on the basis of agreement, signed between the lender and borrower.
- Car loan with adjustable interest rates: Car loan with adjustable interest rates mean that the lender will be required to pay a lower interest rate for certain tenure and afterwards, it is increased, in accordance to the interest rate agreed between lender and borrower.
How To Get Best Car Loan Deal?
Seeking a car loan is no more remain a cumbersome process, especially when you are regular in making payments and you have a viable financial standing. Banks provide varied benefits to the borrower on a car loan and many times also dishes out various exciting facilities once he/she fulfills certain conditions. Let's find out what makes one eligible to get additional benefits.
- If you have a credit card- If you are holding credit card of specific bank then you are eligible to get some additional benefits from that bank, provided you have fulfilled all conditions. You are required to hold the credit card/s for a particular minimum period and would be required to submit proof of recent usage of the card. You would get quick processing of car loan along with other benefits. In most of the cases, such benefits are available to high net worth credit cardholders of eminent banks.
- If you are holding a fixed deposit with the same lender- If you are applying for a car loan with the same bank where you are having a fixed deposit then you should ask for the high loan amount without any hesitation. In this case, bank will consider your fixed deposits as a security against the loan. You may also get 95 per cent of the car value as a loan instead of the normal loan amount of 80 per cent. It would cause less burden on your monthly budget.
- No submission of income proof- Banks can also waive the condition of submission of income proof. However, there are certain conditions which are attached to it. The offered loan amount would be a lower one as the lender would play safe by keeping their risk low. Moreover, the loan would be offered for a short duration.
Points To Consider Before Availing A Car LoanBelow are few things which you are required to consider before availing car loan in India-
- Interest rate - Rate of interest is the most crucial factor which should be given prime importance. In India, the car loan interest rate can vary anywhere between 8 per cent to 16 per cent. So, you should do a proper study of prevailing interest rates before taking the final decision.
- Check the credit history - Lender would be first interested in knowing that whether you can pay the EMI or not. You should make sure that you have received your credit history and there are no debts before getting the car loan.
- Eligibility - It is required to do eligibility check as no bank will be ready to offer you loan if you are below 18 years of age. You should also submit proper proofs and varied other identities in order to prove the same.
- Market study - Doing a thorough market research would help you in buying the car which you are intended to buy. By doing proper research, you will be able to get more options that are suitable to your budget.
- Guarantor - A bank can ask for the third person guarantee, so you should be ready with a friend or relative who can assume liability in case you make default in payment. However, this clause can be avoided if you are having a good credit history.
Types Of Car Loans
- Margin Money Scheme - You would be required to pay margin money of at least 10 per cent of the total loan amount, along with EMI. The balance amount would be pay through post-dated cheques, which will be issued for the remaining EMI's. One of the biggest benefits of this scheme is that one is required to pay low EMI as compared to the other schemes of the same amount.
- Advance equated monthly installment scheme: This scheme gives 100 per cent loan. You would be requiring paying up to five EMIs in advance and the remaining amount will be paid through post-dated cheques, which will cover the remaining loan period. Though this scheme offers cent per cent finance, you would be require to pay five to nine installments up front.
- Security deposit scheme: You are required to deposit a specified sum as security deposit against the amount which you have provided as the loan. Once you will complete the full period of the loan, the security deposit amount will be refundable to you. You will earn interest on the deposit, which in most cases is lower as compared to the one which is charged to you on the loan amount.
- Hire purchase scheme: In this the car is let on hire and the hirer will have an option to purchase the car in accordance to the terms and conditions of the agreement. It is mostly given by non-banking finance companies.