Unique Features of a Car Loan

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A loan that can be availed against cars, or to buy a new car, or to buy an old used car is a car loan. It doesn’t require much energy of the applicant to avail and the banks and Non-Banking Financial Institutions are providing this loan to thousands of customers on a daily basis.

The documents required to avail a car loan

The applicant should be aged between 18years-75 years

ID proof: A government authorized document verifying the applicant’s ID. PAN card, Voter ID, Aadhar card, passport, driving license, or any other government-issued ID is accepted by the bank or NBFC.

Address proof: Official document issued by the government, which verifies the place of residence of the applicant. PAN card, Voter ID, Aadhar card, passport, driving license(any one)are all accepted by the bank or NBFC.

Income proof: The applicant should receive a stable income/profit of a minimum of Rs30,000 to avail a car loan in most banks and NBFCs.

Bank statement: The bank statement of the employee for about 3months to 6months (depending on the financier) is required by the bank or NBFC.

Car quotation: A quotation of the car mentioning all the fees and charges is expected by the lender.

Credit score and debt to income ratio: CIBIL score is a 3 digit number that usually varies from 300-900 assigned to every account holder in any bank or NBFC.This score must be a minimum of 700 to be eligible to avail a car loan. The debt to income ratio is the ratio between the applicant’s earning and spending.

The ratio should be low for the applicant.

 

Features and benefits of a car loan

Loan amount: Most banks and NBFCs grant 90% of the car’s ex-showroom value and few banks like HDFC offer up to 100% of the car’s value. Therefore even when the applicant has no money, a car loan covers all the charges for buying one.

Interest rate: The rate of interest for a car loan is much lesser than many other loans like home loans, or personal loans. The interest rate varies from 7.5%-14% in most banks and NBFCs. Car Loan EMI Calculator can be used to know about the amount of the Equated Monthly Instalments, the applicant would need to pay.

Tenure: Banks and NBFCs grant car loans for a minimum of 12 months and a maximum of 84 months in most banks and NBFCs

Payment Flexibility: EMI and the loan amount can be paid using different methods such as net banking, cheque or cash, or auto-detection(detects the EMI amount from the bank account automatically). The applicant can choose any of the above

Loan processing: The loan is processed rapidly as there are only minimum documents required and the eligibility criteria are not much. Therefore the money is deposited in your account within 2-3 days of the approval process.

Prepayment and processing charges: Prepayment fee is the amount the bank or the NBFC charges the applicant for closing the loan sooner than planned. Most reputed banks and NBFCs charge 5% of the loan amount with additional taxes. The processing fee is for the processing and fulfilment of the application by the bank or NBFC. it is usually charged up to 1% of the outstanding loan amount.

 

Conclusion

A car loan is a flexible and considerable loan that makes numerous people’s dreams come true. All the applicant needs to do is avail the nearest trustworthy bank and fill out an application form. Or better yet, the loan can be availed in online mode too, which is very handy at times like Covid. The applicant after receiving the loan should make sure the monthly installments are paid without due and manage a good credit score during the tenure.

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