How Can You Take A Car Loan? Loan Very Simple Process 2022

Introduction !

It is everyone’s dream to have a branded car along with the house. Car not only makes your life comfortable, but also reduces many difficulties. Coming to the office while battling public transport or going out for a weekend trip, everything becomes very easy.

Earlier, buying a car was a big deal for anyone, as a lump sum amount had to be spent for it, but now it has become very easy due to the availability of loans easily.

Banks and non-banking finance companies offer car loans on easy monthly installments, which has made buying a car very easy now. This does not spoil your budget and also provides convenience.

Car Loan

Lending companies give loans on both new and used cars. However, the interest rates on these two are different. The interest rates for new cars range between 9.25 -13.75 per cent, while for used cars the interest rates range between 12.50 and 17.50 per cent.

Who can take a Car Loan?

Before applying for the loan, there are some conditions, which you need to keep in mind. This includes information about age, minimum salary, type of job and residence.

Documents Required for Car Loan

1. Proof of Identity (PAN Card,

2. Passport, Driving License etc.)

3. Proof of Address like Voter I Card,

4. Passport Age Proof

5. Photograph

6. Car Documents Three Months Salary Slip,

7. Six Months Bank Statement,

8. Income Tax Returns Proof of Income like Income Tax Returns Some companies use the car. Do not finalize loan without copy of insurance and driving license.

Hypothecation

When you buy a car by taking a loan, it is mortgaged with the lending company. This gives them the right to confiscate your property in case they are unable to repay your loan. If you are not able to pay the monthly installment on time, then they can pick up the car and take it away.

Hypothecation letter is also a part of the car registration process. Once you repay the loan, you can remove the hypothecation of the lending company from the registration papers.

To remove the hypothecation, you will have to go to the concerned registration transport office with no objection certificate, car insurance papers and address proof.

It is important to note here that it is necessary to take NOC from the company giving the loan. After this, give it to the insurance company and issue the insurance paper in the name of the new owner.

Car Loan Amount

The loan amount depends on your age and income. How much loan you get for the car depends on the lending company. At this time, generally you can get a car loan up to four to six times your annual income.

Up to 80-90 per cent of the cost of the car gets financed. Some banks, however, finance up to 100 percent. This could be the ex-showroom price or the on-road price.

Ex-showroom price is the amount paid to a dealer for buying a car. When you bring the car for plying on the road after paying registration charges, insurance, road tax etc., then it is the on road price. When you go to take a loan for a second hand car, then the expenses incurred in re-registration are not covered.

Interest Rates on Car Loan

In addition to the Marginal Cost of Funds (MCLR), the companies lending to the car loan amount also charge some extra amount. Usually these rates are fixed. This makes it easier to repay the loan.

If you think that interest rates may come down in future, then you can take interest on floating rate. At present, the interest rates are in the range of 10.30-15.25 percent.

Some lending companies, however, also give a discount in the interest rate to women.

Taking a second hand car loan instead of taking a new car is an expensive deal. Most of the banks charge more interest on this.

What are the expenses in Car Loan?

Banks levy many charges for giving loan or repaying the loan ahead of time.

1. A processing fee is charged when you apply.

2. This can be 0.4-1 percent of the loan amount.

3. Banks charge fees for premature repayment of the loan.

4. Some banks charge five to six percent on this. However, some banks do not charge for this.

Some banks offer part payment facility to repay the car loan. This means you can repay a part of the loan whenever you have the money. Some banks also charge a fee on payment. You cannot prepay the loan within six months of taking the loan.

Repayment

Generally, car loans are given for one to seven years. You can pay it ahead of time as per your convenience.

Take Care

1. Most banks finance medium cars, SUVs and MUVs. However, before applying for the loan, you should check how much loan the bank is offering for which car.

2. If the car is purchased in the name of any person, then no depreciation can be claimed in the income tax for that. There is no tax benefit on car loan.

3. While taking the loan, you should calculate the interest to be paid on the car loan.

Conclusion !

Applying for a car loan is easy, as it has less documentation requirements. Here you do not even need to mortgage anything separately. The loan is secured with a car. However, you should keep your budget in mind while buying a car.