One of the most utilised financial products in India, availing car loans has increased leaps and bounds, especially in the past decade. What initially began as a process of second-hand car finance has now evolved into becoming one of the easiest ways to buy a new car.
Car companies and loan providers have started collaborating with each other to roll out customizable car offers for people looking to buy new cars or trying to find second hand car finance. With the surge in the number of cars available in the market, whether they’re budget-friendly or luxury, people have a wide variety of cars to choose from. Owning to the low rates of interest on car loans, it has now become easier than ever to purchase a vehicle.
So let’s find out more about how car loans work in India and the most commonly found car loan types.
What is the process of getting a car loan in India?
Car loan providers have greatly simplified the process of getting a loan in India now. While the steps might vary depending upon the bank you choose, most of the loans are now disbursed without the loan seeker making a visit to the actual bank premises.
1. Form filling- A tedious but an important step in getting second hand car finance, duly fill in all information needed by the banks to make it easier for yourself to get a loan. 2. Verification- Once you’ve provided this information to the banks, they will make calls to verify bank credentials and documents provided by you. 3. Approval & Disbursement- Once step 2 is done and everything seems in place, the lender approves the loan, and in a span of 2-4 days, the amount is credited to your car provider or to you to pay to the car company.
If you are buying a car from someone, then you can use this amount as second hand car finance and pay it forward to the party you are buying it from.
What factors contribute to the quick approval of car loans in India?
How can you ensure that your car loan is approved quickly and without any problems? Well, these are the main factors that contribute to building your credibility to get a car loan quickly.
CIBIL Score: A country-wide recognized rating system for any individual’s finances, the Bureau of CIBIL bases your score on the repayment of loans taken in the past and your consistency with them. If you have been regular with your monthly installments, you have a high score, making you more credible. On the other hand, if you don’t make your payments on time or miss them, you’d be given a lower score, which might impact your loan approval process.
- Car age: If you are seeking second hand car finance against your old car, the age of your car matters the most. Since the value of your car is depreciating each year, loan lenders don’t give loans for cars that have been pre-owned for more than 3 years. Be mindful of this while applying for a loan.
Car Loan Types
- For a new car: This form of loan is usually the easiest to get approved. If you plan to purchase a new car, the bank or loan lender might pay you up to 85% of your car cost. The amount is disbursed directly to the car seller. However, what one should ensure is that all EMIs for a loan is paid on time. This is important as your car is a security against the loan. If you don’t pay timely, your car can be seized by the moneylender.
- For a used car: A car previously pre-owned by people for a certain time period is a used car. Sometimes, people try to acquire second hand car finance from lenders. Banks and financial agencies offer loans on such cars only for those that are not older than 3 years. Why is second hand car finance trickier? That is because the value of a car depreciates every passing year and the car loses value. For such a car purchase, second hand car finance can range from 50-80%.
Interest rates on car loans
While second hand car finance interest rates vary from bank to bank, a general amount comes to 8-11% p.a. The interest amount can also depend upon a person’s income levels, loan amount, repayment tenure, etc. There are many lenders and banks offering car loans, so you should weigh all your options before deciding the lender you want to take the loan from. Sometimes, the car company you’re using to make the purchase can also get you in touch with different lenders who can offer you competitive rates.