All you Need to Know about a Car Loan

Buying a car is a big dream for every man, and a loan makes it easy to fulfill. That’s why most people take a loan to buy their dream car.

A car loan is also called an automobile loan or auto loan. It is the amount of money a consumer borrows to buy a car.

Advantages and Disadvantages: –  

These loans usually have a low-interest rate.

The process of taking a loan is quite simple. 

  • Since it is a secured loan, a person with an average credit score may also be eligible to avail of the loan.
  • On the other hand, if we talk about its drawback, you may need to make a down payment for the car instead of getting the entire amount on a loan.
  • The car will remain in the name of the bank till all the installments are paid.

Eligibility Criteria:

Loan eligibility may vary from bank to bank. The general eligibility however is as follows: 

  • The age of the applicant should be between 18 years to 75 years.
  • The minimum monthly income should be 20 thousand rupees.
  • It is mandatory to have completed at least 1 year with the existing employment.
  • Must be salaried or self-employed working in a government or private company.

For how long should one take a car loan? 

Although people buy cars primarily for a tenor of three to five years, lenders offer loans for longer tenures. If you take a car loan for a longer-term, you will pay a lower EMI. On the other hand, you will have to pay a higher EMI if you take a loan for a shorter tenure. Therefore, the loan should be taken, keeping in mind the ability to pay the EMI. 

What charges do customers have to pay? 

For car loans, companies charge customers a processing fee and some other charges like prepayment or documentation in addition to the interest rate. That is, if you have thought that you have to take a Car Loan, then check the rates of companies beforehand. With this information, you will be able to negotiate further. 

Can Customers Get the Loan Transferred? 

Banks also give the option of transferring the car loan to the customers. That is, you can transfer this loan to another person as well. If you have bought a car and want to sell it later, but the loan is not over, then in such a situation, this facility of banks can prove to be very beneficial. However, the process is a bit long. 

What are the Documents Required? 

You need to provide the following documents- 

  • proof of identification
  • proof of address
  • KYC documents
  • Proof of Income (Form 16- or 6-Months Salary Slip)
  • Proof of age (minimum 18 years)
  • photograph
  • car papers

On what Basis is the Loan Amount Decided? 

The loan amount is decided based on the income of the customers. Usually, customers get loans up to 80-90 percent of the cost of the car. Some banks even finance up to 100%. 

Apart from this, the CIBIL score, i.e., credit score, also affects the loan amount. 

What is the highest loan amount for a new car loan?

The maximum loan amount you obtain is different for various banks. It depends on the car you select. You can analyze your eligible loan offer. Commonly most banks provide loans for 80% to 90% of the on-road rate of the car.

What is a Two-Wheeler Loan? 

A Two Wheeler Loan is a loan through which one can buy other vehicles like electric bikes, electrical cycles, Scotty, moped bikes, battery-operated two-wheelers, etc. This loan can be available from 25 thousand to 2.5 lakh rupees. 

Some banks and NBFCs help you take this loan, with the help of which they provide you 90% to 95% of the loan amount, which you can pay monthly EMI. 

Generally, a bike loan is not given for an amount less than 20 thousand rupees. 

What are the documents required? 

Documents: Nowadays, you get this loan through some online websites and apps, with the help of which you can buy bikes, electric cycles, etc. 

Let us know which documents you will need for this: 

  • Proof of Identity (PAN Card, Passport, Driving Lic, sense, etc.)
  • Age Proof: Address Proof like Birth Certificate, Voter Id Card, Passport
  • Photograph
  • Blank cheque leaves
  • Latest 6 months’ salary slip and Form 16 as income proof
  • Bank statement of last 6 months
  • Proof of income such as income tax return
  • Signature of the Applicant

Note: In some branches, it is not even necessary to give a bank statement; it depends on the bank’s own rules; the bank also asks for the signature proof of the Applicant. 

Eligibility: The criteria for a two-wheeler are as follows: 

  • Your age should be between 21 to 65 years.
  • The credit score should be good.
  • Applicants should be Salaried and self-employed and should have an Income Source.
  • If you do a job, then your minimum monthly income should be more than Rs. 12500. Verification can also be done by the bank, finance company at the position, location, or business office.
  • Your annual income should be more than three lakhs.
  • You must have all the required documents. Like Aadhar Card, Pan Card, Voter Bank Statement.
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