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Car Loan

With a rising index of population and pollution, personal Cars are no longer luxury; a necessity rather. Small Family outings, a sudden emergency to travel is always easier with a Car around. Previously, buying a Car was considered a huge investment, a big outflow of liquid assets viz. Cash. Thanks to the Customer-friendly schemes and options provided by numerous Public and private Banks, buying a Car is no longer a headache. So, what are the basic factors that one needs to consider when approaching for a Car Loan-

The rate of interest- Most Banks offer a fixed rate of Interest on Car Loans i.e. you need to shell out a fixed amount every Month as EMI during the tenure of the Loan. EMI consists of both Principal & Interest though the interest component is higher during the initial years.

Amount to be taken- This is absolutely your decision. Ideally, it’s advisable to go for an amount for which the EMI will be easy on the pocket. Most Banks are ready to finance even 100% of the on-road price provided you have a decent CIBIL Score.

Tenure of the Loan- Most Car Loan tenures vary between 15 to 84 Months.

The best part about Car Loans is they are secured in nature. Your Car stands as security. In case of failure to pay the EMI, the only thing you lose is the Car though it will also put a dent over your CIBIL Score. Evidently, it’s always better not to miss any EMI.

Yes

Scout for best rates and offers – check the current offers and car loan interest rates for employees of Corporates and specified ones

Do not exceed your loan eligibility –lots of online calculators are available to give you an idea of your loan eligibility. It’s better to apply for 10% lesser than that.

Check & Compare car loan rates based on loan amount – Go ahead. Do some research. Learn the parameters for better interest rates and take an informed decision

Avoid applying to multiple Banks: Choose one, go with it. Applying to multiple Banks won’t yield any special benefit.

Discounts & Special rates– Few Banks offer lower rates on the car loan for lesser tenures while some offers special rates for certain category of Employees as Defense personnel, Central Govt. Employees etc.

Loans offered by Car Dealers – Most Car dealers offer a comprehensive package of Loan. Check carefully before going for one. You may end up paying more in that bargain.

Give preference to your current bank– A loyal customer is what a Business wants & Banks are no exception. You may get some preferential treatment in terms of loan application & disbursement process, not to mention the interest rates

Hidden Charges & fees: look for the fine print, you may get surprised with hidden charges and certain fees. Be cautious of the generous offers and loads of freebies

Insurance: A very important factor. Check for the options, maximum plus coverage, and riders. Additional benefits at minimal cost is definitely a plus.

CIBIL Score

Now, what’s my CIBIL Score has to do with my Loan?

It is important. A high CIBIL Scores indicates a good repayment history and Banks may even offer a higher amount with lower interest. Contrarily, lower CIBIL Scores are not-so-good indicators of your borrowing habits and may cause to reject your Loan application- worst scenario. It’s always better to make the repayments in time and maintain a healthy CIBIL Score. Normally a credit score of 700 or more is ideal to apply for a Loan. To encourage commoners to go for Car Loans, the lenders have announced 50% concession on processing fees depending over your CIBIL score. The offer is valid till 31^st March 2019.

Document Checklist

Let’s move the focus to the Documents needed to apply for Car Loans. You will need these basic ones no matter which Bank you approach-

Identity proof

Residence and Address proof

Income Proof

Down payment receipt of Dealer

Original quotation

Bank Statement

Passport Size Photos

Last ITR filed

Other factors

Now that you have deposited your Loan application for processing, Bank will consider a few more factors before going ahead with your loan-

Car loan down payment- Banks offer car loan either at 80% of on-road price or 100% of the ex-showroom price. Remember, 80% on-road price is almost equal to 95% ex-showroom price. It’s better to go for maximum down payments to avoid higher EMIs.

Car Loan Insurance premium- It’s safer to cover your Car loan with Insurance. However, the scope and premium will vary from bank to bank.

Car Loan processing fees- This, again, varies with the bank to bank.

The most sought-after Banks providing Car Loans in India

HDFC Bank: For the month ending 31^st Jan 2019, HDFC Bank has once again emerged as a Winner in Retail Loan segment. Recording an increase in net profit by 20%, the Bank once again consolidated its status among borrowers. The Bank offers Car loan to the extent of 100% with flexible payment options. Existing HDFC Bank Customers enjoy special rates and quicker loan disbursal. Apart from an easy EMI option of rs.1239/lac, the bank has come up with interesting schemes in the form of Balloon EMIs and Step-up EMIs.

ICICI Bank: This Bank is known for the most comprehensive, feature-rich Car Loan Schemes. Apart from offering a 100% loan on the Car price, the Bank also offers maximum loan tenure -7 years. Existing ICICI Customers enjoy pre-approved car loans with minimum documentation, online application, and instant approval. The Interest and other related charges are customer friendly and can be customized to suit your needs and affordability.

SBI Bank: Most preferred Bank of India, SBI, is not far behind either. Apart from assuring 100% finance on Cars; competitive rate of interest, 0% pre-payment charges and an extended payment tenure up to 7 years are some of the key features of this bank’s car loan. In a bid to win Customers, SBI has introduced the unique Overdraft facility on car loans and optional SBI Life Insurance Cover for interested ones.

Axis Bank: A Bank known for the modern, customer-friendly approach. Axis Bank offers 85-95% of the on-road price for cars. Special rates are offered to the bank’s existing priority customers. Features of the offered car loans include comfortable tenure ranging from 1-7 years, attractive interest rates, customized schemes for salaried, non-salaried and professionals. The minimum loan amount offered is Rs.1 lac.

Hope this piece of info gives you an insight about Car Loans. Aided by this, you may embark on a journey to bring your dream vehicle home.

Process

varies with bank to bank

Bank	Interest Rate	Minimum Age (in yrs.)	Minimum Income (in Rs.)
State Bank Of India	10.75% Per Annum	21-65 Years	Net Annual Income Rs. 400,000/- and above
ICICI Bank Limited	11.5% to 16.5%	25 years to 58 years at the time of maturity of the loan	Gross annual salary of at least Rs. 2.5 lac per annum
Allahabad Bank	10.7% per annum	The loan should be repaid at least three months before the date of retirement from service	Minimum gross monthly income Rs.25000/-
Andhra Bank	Starting from - For New Car : 9.40%, For Used Car : 11.85%	Minimum 21 years & Maximum 65 years	Rs. 1 Lakhs p.a.
Bank of Baroda	10.50%	Minimum 21 years; Maximum present age + repayment period should not exceed retirement age in case	Income Criteria Not Available
Bank of India	Starting from - For New Car : 9.50%, For Used Car : 8.90%	Minimum 18 years & Maximum 65 years	Regular Income
Canara Bank	11%	Minimum and maximum age Not Available	Income Criteria Not Available
Punjab National Bank	10.5% to 11.75%	Information not available	Net monthly income - Rs. 20,000 p.m.
Union Bank of India	10.7% p.a for new cars; 15.5% for old (fixed)	18 years and above	Income Criteria Not Available
United Bank Of India	Starting from 9.10%	Minimum 21 years & Maximum 65 years	Rs. 2.40 Lakhs p.a.
Axis Bank Limited	11.50%	21-60 Years	Minimum income of Rs. 2.4 Lac p.a. or all approved car models
HDFC Bank Limited	Information not available	21-65 Years	Minimum Rs. 100000 p.a including the income of spouse
Industrial Development Bank of India (IDBI)	10.25% per annum	22 years to 65 years	Minimum 1.5 Lac per annum
Yes Bank	10.25% to 12.25%	Min. 21 years, Max. 58 years	Minimum Annual Income Rs. 3 Lakhs

Disclaimer: The Details shown may be different from actual. Please confirm on the bank site before process.

Frequently Asked Questions (FAQ)

What documents are required to be submitted for processing of a car loan?

When applying for a car loan, you need to submit the following documents to the bank for verification:

Application for a car loan

Last three pay slips

Address proof

Identity Proof

Pan Card

What is the in general duration of repayment of a car loan?

The typical tenure of repaying the loan availed for purchasing a car starts from one year and can be extended to 5 years. If you wish to shorten the mandate of the loan, then you have to pay a high amount of monthly instalments. In the present days, specific lenders have repayment duration up to 7 years.

Is there any tax benefit for availing car loan?

There are no tax benefits for availing a car loan. It is for the reason that it is at all the times advisable to go for the car loans based on the actual requirement.

What are the steps to be followed by the bank after you have paid the last EMI?

When you have completed repaying the bank, the bank will issue Form 35 and a no objection certificate to the Road Transport Office. Only after getting the NOC from the bank, the RTO will remove the lender's name from the RC book documents and endorsements.

What is meant by zero per cent financing?

It is one of the new gimmicks that is played by some car manufactures in collaboration with some banks. In this scheme, the responsibility of paying the interest to the bank is of the manufacturer and not the borrower of the loan.

Does one need collateral for a car loan?

Car loan comes under a secured loan. In a car loan, the car that you purchase acts as a collateral. For this reason, there is no requirement of any additional guarantee for the approval of the loan. However, most of the banks, ask to have the registration certificate of the car endorsed with the bank. Once you repay the total loan, you can cancel the endorsement.

What is the maximum car loan amount that can be availed?

The banks can approve loans up to a certain percentage of the total car value on-road. In most of the cases, the banks can finance about 80-90% of the total on road price of the car while some banks finance about 100% on the vehicles ex-showroom price. This calculation of the maximum amount depends upon the price and type of car you are applying for a loan from the bank.

What is the minimum salary requirement for applying for a car loan?

The banks have not yet specified any minimum salary requirement for availing car loans. However, there is some internal threshold level for banks to decide on the approval of car loan to any individual. If you think your salary is not so impressive, then it is better to apply with a co-borrower. It increases the probability of loan approval.

What are some of the things to consider when applying for a car loan?

There is an excellent possibility of your car loan to be rejected if you don’t have an impressive credit history with the bank. If the credit score is less and you have been a defaulter in the earlier transactions with the bank, then the bank rejects your application for availing a car loan.

Can you negotiate the rate of interests?

If you have an imposing credit history with the bank, you can quickly negotiate the rate of interest. If the bank finds all the previous transaction of yours with the bank are right, then it can think of lowering the rate of interest.

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