Owning your dream car has never been this easy, thanks to the plethora of financial instruments available at your disposal. Almost all leading banks and non-banking financial institutions in the country offer car loans to their customers at attractive interest rates. The terms are fairly convenient, making four-wheeler loans one of the most sought-after consumer loans in the country.
As a consumer, you are quite likely to be overwhelmed by the sheer volume of options available in the market. Therefore, before you go about applying for a car loan, it is suggested that you do your due research and familiarise yourself with the different interest rates and terms & conditions offered by the bank. That said, there are three types of car loans that you will find at almost every leading bank. Let’s take a look:
When you are interested in buying a brand-new car and are looking for financing options, a new car loan is one way to go. While some banks provide finance on the on-road price, including the registration fee, insurance, and warranty, service package, cost of accessories and maintenance costs, others consider ex-showroom costs. In a few instances, banks may finance up to 80-90% of the total cost, with the remaining amount coming out of your pocket.
Interest rates vary from bank to bank and to a great extent, also depend on the segment/type of the vehicle. The tenure varies from 1 to 7 years.
In certain cases, buying a brand-new car may be out of your budget. This is where opting for a used car may serve as a more viable option. AU Bank sometimes finances as much as 90% of the price of the vehicle.
The quantum of the loan and the interest rate also depends on certain conditions like the age of the car at the time of loan maturity, brand/model, insurance validity, et cetera. The maximum loan tenure may be 4-5 years.
This option is not a car loan, per se, but more of a way to get a loan by using your car as the collateral. It is an efficient way to raise funds, especially when you don’t have any other asset or are not willing to use them as collateral. The loan amount depends on the market value of the car and can be up to 90% depending upon the individual’s credentials. Once again, this amount varies from bank to bank. Another aspect of loan against the car is a top-up loan, that is, availing additional loan on top of the existing car loan.
The tenure of the loan can be up to 7 years; although, some banks prefer restricting the loan repayment period to 4 years. Since it is a secured loan, its interest rates are more likely to be less than the rates you get with a personal loan.
It is solely up to the bank’s discretion to sanction a car loan. However, there are a few factors that they do consider, like:
Age of the Applicant: The individual applying for the car loan should be aged between 21 years and 65 years. He/she should either be an employee of a government/private company/established institution, a self-employed professional/businessman, or be engaged in agricultural/related activities.
Income Requirement: As usual, the minimum yearly income varies from bank to bank; but as a rule of thumb, it should be at least Rs. 2,50,000. Some banks may ask for higher income (turnover, in the case of self-employed professionals); and in many cases, the income of the co-applicant can be combined together. In the case of AU Bank, assessment may also take place on an individual basis by involving the Financial Inclusion team.
Credit Score/Credit History: Banks will also look at the creditworthiness of the applicant. A good credit score will most definitely elevate your chances of getting a car loan.
When applying for a car loan, be sure to go through all the important terms and conditions. Make note of foreclosure/prepayment terms and ensure that all of your documents are in order to ensure a smooth application. In case of any queries, never hesitate to get in touch with the bank’s customer service executives.