What is a car loan?
Its a loan taken to purchase a car (new or used) – it may be a small car or a sedan or a sports utility vehicle (SUV) or a multi utility vehicle (MUV). Its also called auto loan.
How do I get a car loan?
You can apply for car loan online here and get instant quotes from different banks.
How long could my car loan tenure be?
Your car loan tenure can be anywhere from 12 to 60 months. Some banks offer car loans with a tenure of up to 7 years for new cars.
What is the maximum amount of loan that I can avail?
Banks usually provide loan of 80% to 90% of car price (considering the ‘on road price’). Banks consider your net annual income too before financing.
The amount of car loan you will get depends on following factors:
- Your income – Maximum amount of car loan you will get is X times of your monthly income. For example, maximum loan amount that SBI offers is 48 times of the net monthly income for a salaried person; and up to 4 times net profit or gross taxable income for self employed and professionals. You can club your spouse’s income to enhance your eligible loan amount.
- Your car – i.e., the price and type (standard / premium) of the car you are going to purchase.
- The percentage of finance offered by the bank – Banks usually offer 80% to 90% of ex-showroom price. This percentage differs from one bank to another bank.
How should I pay the EMI?
You can pay your installments through:
- auto debit facility if you have a savings account with the bank where your EMI will get debited automatically at the end of every cycle OR
- you can give post dated cheques (PDC) to the bank. Make sure your account has sufficient funds to avoid check bounce.
Is there any collateral required to get a car loan?
No. The car itself is the security for your loan. But your car will be hypothecated with the bank and it involves some paper work.
How can I increase the loan amount?
You can increase the loan amount by clubbing your income with your spouse / son / father etc.. In that case he/she will be the co-applicant for your loan.
Fixed rate of interest or floating rate of interest?
Different banks offer different type of loans and each one of them has its own merits and demerits. Research thoroughly and do your math before taking the loan.
What is EMI in advance and EMI in arrears?
To know more about these two EMI schemes, please click here.
Can I make prepayment?
Banks usually allow you to make prepayments after certain period of time, say, 3 months or 6 months. Prepayment charges may apply on the outstanding loan amount if its a fixed rate loan.
Can I take car loan to purchase a pre-owned car?
Yes, few banks offer the loans to purchase used cars. But for the used cars, the amount of finance, loan tenure and rate of interest and such other terms and conditions will be different. All of these depend on the model and the resale value of the car you are planning to purchase. Moreover, banks typically finance the purchase from an authorised used car dealer only.
Can I use car loan to purchase car accessories?
Some banks (for example SBI) will finance car accessories other than factory fitted features.
Can I get finance for insurance and registration?
No. Banks consider only the ex-showroom price, which does not cover insurance and registration. However, some banks may finance these items under special schemes.
What happens if the car is stolen or meets with an accident?
In that case, contact your car insurer. The insurance company will assess the extent of damage and pay the claim proceeds to the bank.
Can I sell the car before repaying the loan amount fully?
No. You can not sell your car until you pay off your loan. You should get NOC from the bank to sell your car.
What should I do after paying the last EMI?
After the last EMI has been paid, the bank will issue Form 35 & NOC to RTO and their name will get removed from the RC book. In the same way, get an NOC from the bank issued to the insurer to get their name deleted from their records.
Is it OK if I delay some of my installments?
If you delay your payments, banks may charge you delayed payment charges which compounds monthly. But more than that, such delay in payments will definitely and severely dent your credit score.
What happens in case of default?
If you do not pay the instalments for several months, then the bank will issue a notice and ask you to surrender the vehicle. If you fail to do so, the bank may seize your vehicle after appropriate notice period.
Are there any tax benefits on a car loan?
No. There aren’t any tax benefits on a car loan.
Is overdraft facility available with car loan account?
Yes. SBI offers one such loan under a scheme named Car Advantage Loan which works very much like SBI MaxGain. As it is an overdraft loan account, you can park your surplus money in this account; thereby you can reduce the interest outgo on your loan and at the same time have some money for your emergency needs.
Can I negotiate with the bank to get lower interest rates?
Yes, you can. If you have a good credit score and satisfy certain conditions set forth by the banks, then they may reduce the interest rates. So do check with the banks thoroughly about all these possibilities before taking the loan. Check here to compare and get lowest interest rates on car loans.
Where can I apply for car loan online?