Car Loan

OVERVIEW

Do you dream to own a car? But something has been stopping you. For most, the one important reason could be, your dream car is probably out of your budget (budget constraint). If that’s the reason then car loan is the best option for you.

As the name suggests, a car loan is an amount given by banks to finance the car of your choice. Car loan is also called Vehicle loans or Auto loans.

Many lenders offer loans worth up to 80% of ex- showroom price of the vehicle you choose to buy. You can repay the loan easily through scheduled EMIs at affordable interest rates within a stipulated tenure.

Whether you want to purchase a new car or want to go for an old one, you can finance your car with a car loan.

At Mantra, we intend to fulfill your dreams and decorate the doorway of your house with your dream car. Let’s us see some unique features and benefits of Car Loan

UNIQUE FEATURES AND BENEFITS OF CAR LOAN

Loan Amount:The amount of the car loan depends upon the value of the car and the EMI that you can pay. While some lenders offers financing up to 85-100% of ex-showroom price of the car, others offer financing of 85-100% of the on-road price.

Some lenders offer loans up to Rs.100- Rs.500Lakhs.

Loan Tenure:Just like a personal loan, the tenure of car loan ranges between 5-7 years.

Interest Rates:You can get loans at both fixed and floating rates. Car loans usually begins from 7.00% onwards but varies from lenders to lender.

Collateral or Security: Since a car loan is secured against itself therefore there is no need for a separate collateral or security.

Documentation:Requires minimum documents as KYCs, Income proof, Bank statement etc.  for loan processing.

CIBIL Score: CIBIL score is also important while determining your eligibility and the amount to be sanctioned. A 750+ score is considered as a decent one.

Loans to buy used car:One interesting benefit of car loans is you can get loans to finance a pre-owned or used car. However, the used car you wish to purchase should be eligible for financing by the lender.

TYPES OF CAR LOAN/AUTO LOAN

Before you go ahead for a car loan or an auto loan you should know about the types of loan available in the market:

New Car Loan: Loan amount given to finance a new car is called new car loan. Lenders can finance up to 80-100% of the ex-showroom price or the on-road price of the vehicle’s value, depending upon the lender’s policies.

Pre-Owned/Used Car: Lenders offer loans to purchase a pre-owned or used car on the condition that the vehicle you intend to purchase is eligible for financing by the lender. Since lenders fund you for an already used vehicle, therefore this type of loan comes with higher interest rates and lower loan-to-value ratios (LTV).Some lenders may offer up to 100% financing while others may offer up to 80%.However, the quantum of amount usually depends on the lender’s valuation of the used car.

Loan Against Car: It is also known as Car refinance loan. This type of loan is a secured loan you have to keep your car as collateral to the lender to avail the funds. The good point is, you can use your car while its still kept as collateral with the bank. The amount of loan to be sanctioned depends upon the car’s current condition and its current on road value.

Borrower’s usually go for a car refinance loan if you are already running a car loan to get a new car loan at a comparatively lower interest rate from a different lender. Banks give loan amount up to 60% to 70% of the car value for the tenure of maximum 60 months i.e. 5 years.

At Mantra choosing a car refinance loan becomes better as you have a variety of lenders to choose from. The application process is quick, hassle free and easy.

ELIGIBILITY CRITERIA FOR CAR LOANS/AUTO LOAN

Here we are bringing to you basic eligibility criteria for all types of car loan that is common to many lenders in India :

FACTORS 
AgeBetween 21-65 years
Work ProfileSalaried/ Self-Employed professional/Self-Employed nonprofessional.
Credit Score700 and above.
Work ExperienceMinimum 1 year for salaried and minimum 2 years of business continuity for self-employed professionals/self-employed non-professionals.

DOCUMENTATION

FACTORSALARIEDSELF EMPLOYED/BUSINESS/SELF EMPLOYED PROFESSIONALS
Age Proof:Pan Card/Passport/Birth certificate  Pan Card/Passport/Birth Certificate.
Identity Proof:Pan Card/Voter ID card/Adhaar Card/Valid Passport/Driving License/Employer’s ID card (for salaried) or any other government ID.Pan Card/Voter ID card/Adhaar Card/Valid Passport/Driving License or any other government ID.
Address Proof:Ration Card/Telephone bill/ Electricity Bill/Rental agreement/Passport Copy/Bank Passbook or statement/Driving License.Ration Card/Telephone bill/ Electricity Bill/Rental agreement/Passport Copy/Bank Passbook or statement/Driving License.
Income Proof:Last 3-6 months salary slips. Last 3-6 months bank statements of salary account. Form 16 of last 1-2 years.Last 2 years Income tax return. Bank statements for the last 6 months.  
Business continuity proof  ——————- Gomasta License, Registration Certificate, Service Tax Registration, among others

DO’S AND DON’TS WHILE TAKING A CAR LOAN

After all those planning and savings, having your own car is a rewarding experience but in the excitement of owing the car you should keep in mind certain dos and don’ts which could be deciding factors in fulfilling your dreams of owing your car.

Here are some do’s and don’ts regarding car loan that will help you get your dream car from the right lender at the right rates.

DOs

Do choose the right car:Apart from the luxury factor that attracts most car buyers, the other important factor that aspiring car buyers should keep in mind is the purpose for which you are planning to buy a car. What kind of driving will you use the car for? Will it be for your daily commute or weekend trips or for trade purpose as (loading and carriage of goods) etc.

Therefore, one should be very clear with the purpose of purchasing the car (at least with the category of vehicle) because remember a car is a major purchase and its price can be as much as or more than a year’s disposable income.

Do fetch your credit report before applying:This is another important factor that will play a major role in determining your creditworthiness and deciding upon the interest rates at which loan should be offered to you.

While this is not the only criteria for deciding upon the interest rates, a higher credit score will increase the chances of your loan approval.

Do compare the lending offers and know the interest rates and charges:Since there is a variety of options available in the market you should better compare the financing offers that lenders are offering and go for the one that fulfill your needs and suits your budget.

An ideal loan deal will be to have a reducing loan balance with a low interest rate. However, you should also check the other charges. At Mantra we will help you choose the best deal….

Go for a tenure that suits your budget: Although car loan comes with a tenure of 5-7 years yet you should choose a tenure within which you can complete your repayment.

DON’TS

Don’t just simply go for the first financing offer: The car lending marketplace is diverse and full of options. It may happen so your car dealer may offer you financing. But it would be wiser to explore other lenders and their offers before finalizing one.

Don’t forget to read the terms and conditions:Read the terms and conditions carefully before finalizing the deal. Many lenders may not verbally tell you about the hidden costs; loan to value ratio, down payment, pre-payment charges etc. Therefore, read the fine print of the offer carefully.

It is essential toknow not only the interest rate but also the processing fees and other charges because a loan with lower interest ratemay actually cost more due to processing fees and other charges.

Don’t forget to get car insurance: This is an important aspect in getting a car loan. You should get your vehicle a full cover insurance which is an essential criterion for most lenders who offer loans. It is because in case your car meets an accident before the loan is cleared the lender would be able to clear the balance debt.

Do not forget to keep your documents ready before applying:

If you keep your documents ready it will make processing faster and you could get your loan sanctioned and disbursed fast.

FREQUENTLY ASKED QUESTIONS

1.Why should I go for an auto loan/car loan?

Purchasing a car is a big deal for many as the price of a car could be equal to or more than one’s annual earnings. A car loan would help you buy your dream car without its price being a burden on your pocket. The price of the car is broken into parts (down payment+ {equated monthly interest}) which makes it quite easier to repay the amount.

  1. Can I get a loan for all makes of cars?

Most lenders would finance almost all small, medium and large cars. You can read the brochures to confirm the products they finance.

3.How Can I apply for a Car Loan?

Applying for a car loan is very simple. You just have to visit our website, read well the various options available, search for the product/model you want to buy, compare the price and the interest rates and choose the product you like at most affordable rates.

You can also directly visit a bank, contact a car loan agent, or apply online.

4.How much will be funded in a car loan?

The amount of the car loan depends upon the value of the car and the EMI that you can pay. While some lenders offers financing up to 85-100% of ex-showroom price of the car, others offer financing of 85-100% of the on-road price.

Some lenders offer loans up to Rs.100- Rs.500Lakhs. 

5. What is the minimum and maximum tenure of car loan?

Just like a personal loan, the tenure of car loan ranges between 5-7 years.

6.What is the Car Loan interest rate?

The interest rates offered are reasonable and are based on the location of the customer, tenure of loan and customer profile. You can get loans at both fixed and floating rates. Car loans usually begins from 7.00% onwards but varies from lenders to lender.

7.What factors affect interest rates in a Car Loan?

Interest on car loan depends upon factors like down payment, loan tenure, credit report and your net income. High income with good CIBIL and maximum down payment can lend you loan at low interest rate.

8.How much time does it takes to get loan sanctioned?

If everything falls in place, the lender is contended with your profile, your eligibility, and the required documents submitted, the approval is given in one working day.

9.Is a collateral or security needed for a car loan?

Since a car loan is secured against itself therefore there is no need for a separate collateral or security.

10.What if I fail to pay my EMI of car loan?

If you fail to pay EMIs for 2-3 consecutive months, then lenders will consider you as a loan defaulter. In such a case, late fee charges shall be levied on you, upon the unpaid loan amount. If you keep defaulting your EMIs, lender would send you notice requesting you to clear the remaining balance.

If, however you continue defaulting your EMI then lender would be compelled to seize your vehicle against which the loan was availed. Also your credit score will reduce and your credit report will have negative issues recorded.