Advantages of car loan

It is a loan which lets a buyer to pay for the car through monthly installments or EMIs rather than making a one-time payment. The buyer must make part payment of the price as down payment while rest will be funded by the lender.

Advantages of car loan

Easy to own a car: As many banks provide up to 100 per cent finance support on ex-showroom price, you do not have to wait long to purchase your desired car. 

Flexibility to select the term: Banks propose car loan for tenure of up to 7 years. You have the option to choose the tenure as per your suitability.

Loan for buying pre-owned car

Many banks propose loan on pre-owned car these days. Although the interest rate will be more than the interest rate on new auto loan and the loan-to-value (LTV) ratio will be less than the new car loan.

 

Interest rate can be negotiated

Unlike home loan in case of  car finance you can negotiate the interest rate with your lender if you have a healthy credit score and have good relationships with the bank.

No security required

You are not required to promise any collateral to avail the car loan as your vehicle will be a security with the bank and in case you default to make the payment, the bank has the rights to confiscate the vehicle and sell it off to retrieve the funds given as loan.

Flexibility to select the mode of payment 

You can decide to pay through post-dated cheques or use the auto transfer facility where your equated monthly installments (EMIs) will be automatically debited from your bank account.

Flexibility to decide between fixed or floating interest rate option

You can select the type of interest rate whether fixed or floating. The interest rate will vary on the type of interest rate you are selecting.

Documents required for availing car finance

You will require the following documents while applying your auto loan.

Correctly filled application form.

Photographs of the car loan applicants.

KYC documents, identity proof (Voter Id, passport, Aadhaar card) and any one address proof (electricity bill, phone bill, passport).

Income proof- latest salary slips and bank statements.

Employment proof.

Factors that influence your car loan interest rate

It will be conditional on your credit score. You can negotiate with your lender for a lower rate of interest if you have a healthy credit score.

The tenure of the car finance will not only decide your total interest outgoings but the interest rate. Generally banks charge higher interest rate in shorter term loans and lower interest rate on long term loans.

Age of the car and make will also one of the components that is taken into consideration while determining the auto loan interest rates.

 

Loan processing and sanctioning procedure

The car manufacturers propose car financing which is fast, easy, flexible and transparent. The process for getting loan is extremely simple and requires minimal documentation. A representative from the car finance company will assist you. All kinds of financing options and the terms and conditions will be explained. The representative also helps you with the documentation. Upon securing the loan's approval, the disbursement is made.

You can now own  your desired vehicle from the dealership post loan disbursal.It should be noted that a copy of the certificate, invoice and insurance plan for car registration must also be submitted. There may be unforeseen circumstances that may force you to cancel the loan. In this situation, before the loan disbursement, you will notify the car finance company.