INSUBCONTINENT EXCLUSIVE:
Buying a car used to be a tough affair a
decade or two back and was considered a milestone in one's life
But with easy finance options available, it has become much easier to get your dream car.Car loans are offered by both banks and NBFCs and
is one of the most sought after loans, as it has relatively longer tenure of seven years
But before you opt for that car loan, make sure to check out some crucial details which can affect your repayment schedule through the
years.EligibilityCar loan eligibility is mainly dependent on two factors - the borrower's capacity to repay the loan based on his income and
A good credit score and ample disposable income reflected through statements are also necessary for maximum loan disbursal.For instance, if
you are a salaried individual, the total amount of loan applied for cannot be more than your gross yearly income
Likewise self-employed and business owners have to show their repayment capacity with relevant proofs.Documents RequiredThe primary
documents required when applying for a car loan are:Address Proof for the City of PurchaseKYC DocumentsIncome Proof (Form 16 or Salary Slips
for 6 months)Age Proof (Minimum 18 years)PhotographsSome dealers may also ask for a driver's license, but it is not mandatory for buying a
car.Interest RatesNew car loan have interest rates that are lower than used car loans
Like home loans, both floating and fixed interest loans are available, where banks charge a rate based on their Marginal Cost of Funds based
Lending Rate (MCLR) plus an additional spread
If you think the interest rates will be coming down in future then you can opt for the floating interest rate, or to pay a fixed amount, you
can stick to fixed rate loans.For new cars, the fixed interest rate offered by banks could range anywhere between 8.5 per cent and 11.5 per
cent depending on the tenure, car cost, and borrowing capacity of the individual
Pre-owned car loans and those offered by NBFCs may attract a higher interest fee
The maximum tenure to pay back a car loan is seven years, whether fixed or floating.Processing and Other ChargesLike other loans in the
market, car loans may attract a processing fee
For advance payments there may be a pre-payment fee, and for early closure of the loan there may be a foreclosure charge attached
Make sure to check the percentage of these charges before finalising the lender.Car InsuranceThe government has made it mandatory for all
car and two-wheeler owners to possess third party insurance
You can speak to your car dealer to show you choices for different car insurances
You can choose a zero depreciation policy when you buy the car as it will help you maintain its value for the next few years for future
insurance claims.Associated CostsCar loans will in most cases only cover the ex-showroom prices and may sometimes cover additional
Other costs, mainly road tax and insurance will have to borne by the customer
As of now a maximum of 90 per cent credit of the total cost of the car excluding road tax can be availed from banks.HypothecationWhen you
buy a car through a loan, your car is hypothecated to the lender
Hypothecation gives the right to the lender to seize your asset, if you do not pay EMIs on time
Make sure you can pay your EMIs every month without fail
Once your loan is paid off, collect the relevant documents and forms from your lender to remove the hypothecation with your RTO.(Adhil
Shetty is CEO of Bankbazaar.com)Disclaimer: This is an advertorial and TheIndianSubcontinent is not responsible for the accuracy and
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