January 5, 2019

Car Loan

What is Car Loan?

A car loan is a type of personal loan without any tax benefits which can be availed by an individual to buy a new or used car. Car loan amount could be anything between 60% to 90% of the Ex show room price. It allows individuals to pay a small part from his or her own pocket and rest of the amount need to be paid in each monthly installments (EMI) with interest rate applied. A bank offers such car loans to the borrowers with a good credit score and must be able to pay Car’s RTO, Insurance & min. 10-20% down payment.

Types of Car Loans

Type of car loan depends on the type of car you are looking for, basically there are two types – car loan for new and used, however, there are other types also available like corporate car loan, loan against existing cars.

3 Types of Car Loans

1. Car loan for New Car

2. Car loan for Used Car

3. Corporate Car Loans

New Car Loan:

A new car comes with ex show room price and on road price. Banks usually offer loan on the ex show room price. A bank in India can provide upto 100% of ex show room price depending upon the customers income, credit score, type of car and seasonal offers. Apart from ex show room price, a person should be able to pay RTO and Insurance fees for a new car purchase. Suppose, cost of a new car is Rs. 5,00,000/- ex show room Delhi, then a bank can finance upto 100% of this excluding insurance and rto charges.

Used Car Loan:

Used car market is booming immensely since last five to six years and there are many startups in India currently deals in selling and buying of used cars. The market is huge and the car enthusiasts are lucky enough to grab many lucrative opportunities to own a car. Banks are ready to offer used car loans and unlike new car loan, a used car loan depends upon the age of the car, insured declared value (IDV), condition of the car, previous accidental history and number of owners. Upto 90% loan on IDV is available for used car with lowest interest rate in India.

Corporate Car Loan:

A corporate car loan is when an employee buys a car on a company lease. Here, the entire on road price including RTO & Insurance can be paid by the company and the employee only needs to pay the each monthly installments (EMI). Corporate loans have some sort of tax benefits and low interest rates for some cases. The benefits of corporate car loans are many, however, there are a few demerits too. Once you get your car on company lease, you need to be on the pay role of the company and pay EMI every month. If you decide to change the company then, you need to pay the entire pending EMI’s or loan amount in one go otherwise the company have all the rights to seize the car.

Car Loan Calculator

Car loan calculations depend on the below answers of the questions and a person should first fill the answers before starting the calculation for a car loan.

Following are the 6 important questions for Car Loan:

1. What type of car you want to buy? New or Used?

2. Car make and model?

3. Place of residence?

4. What percentage of Car’s price you want to borrow?

5. Period or tenure of the loan. A long EMI plan looks lucrative but interest rate is on higher side.

6. Your source of income? Whether you are a salaried, self employed, company name, business name etc.

Benefits of Car Loan

Car loans actually brought happiness to the millions of Indians. Now, a lower middle class person can also afford a car easily and as well maintain properly. In Indian cities, cars are no longer a luxury products, its actually a necessity. Whether a working professional or business person, everyone needs a car to communicate easily and effortlessly.

Residential places in Urban areas are far away from the commercial areas and therefore, a professional needs a car to communicate daily on time. A businessman needs purchase a car to deliver the products effectively to his customers. Car loans has been benefiting many in India and one of the best benefits is that the loan can be taken against the car itself like a home loan. So, you can use the car by just paying monthly EMIs and once it gets over, the whole car is yours. Moreover, by having a car loan you will get a chance to improve your credit score by paying EMI’s on time. A bank checks your credit score in order to approve new loans. You just need to take care of your car’s health and each monthly installments. Also, there are many banks which offer insurance against accidental damage to the car. Once you are out of the installments, you will be happy to use the car for many more years. A car can be in good shape even after the loan term is complete. Life time of a car is typically in between 10-20 years and whereas a car loan can be completed in 3 to 7 years only.