What is car loan?
A car loan is a personal loan that allows the potential buyer to pay the vehicle off in monthly payments instead of having to pay the full price all at once. This means that a lending servicer or bank will pay off the car in full, while in return the borrower pays off the debt in monthly payments with an interest fee included as well.
Types of car loan:
- Simple Interest Loans:
Simple Interest Loans are the most common type of auto financing available. The interest rate is based on the outstanding balance of the loan. Borrowers can save on interest costs by paying more than their standard monthly payment.
- Pre-Computed Loans:
Pre-Computed Loans refer to financing where all interest and principal payments are pre-calculated before the borrower and lender agree and sign the paperwork. Although this loan was widely used in the past, most people don’t opt for this restrictive method of financing because it doesn’t allow for early repayment of the loan.
Why should i take car loan?
- Flexible contract terms, or length are available (ranging from 2-10 years)
- Reducing instalments
- A residual can be applied to the loan, reducing the monthly instalments
- Easy Interest rates
- Borrowers have a choice of fixed or variable interest rates
- Tax Benefits:
- A tax deduction may be applicable if the vehicle is to be used for business purposes
- High Security:
- Lower interest rates are available as the loan is secured against the car
What About Leasing?
As car costs have risen, leasing has become a popular alternative to buying. In recent years, leases have comprised more than 30% of new vehicle transactions.
On the surface, leasing and buying with a loan may look similar. Both involve payments over time, but what you are buying is different.
With a car loan, you eventually will pay off the loan and own the car. Your payments end and you have the option of keeping the car as long as you like — or as long as you can keep it running – or selling it.
With a lease, you likely will have a lower down payment, lower monthly payments and lower maintenance costs compared to taking out an auto loan. This is part of the appeal of a lease.
Eligibility criteria for car loan:
- Minimum 21 years of age
- Maximum 70 years of age at maturity (conditions apply)
- Minimum Net Annual Salary of Rs. 2,40,000 p.a. for all approved car models
- Income eligibility based on latest salary slip and Form 16
- Minimum of 1 year continuous employment.
Keep your documents ready
The following documents are required
- Age proof
- ID proof
- Application form
- Residence proof
- Income proof
- Bank statement
- Signature verification proof
- Pro-forma Invoice or Rate List
For More Information:
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