Car Loan - Complete Guide To Compare & Apply Car Loan online

Interest Rates for Car Loans Updated on 12 Aug 2021

Note: The Interest Rates will vary from one bank to another; hence it is crucial to compare the interest rates before choosing a loan product.

To know more about Car Loan Interest Rates

You must maintain a solid credit score for car loan. If your credit score is good, financial institutions & car finance companies will provide low-interest rates in addition to faster loan approval. When applying for a vehicle loan, no security or collateral is necessary. The car serves as a form of security and your auto finance becomes easy.

Varying banks may have different eligibility conditions for automobile loans. The following are some of the most usual requisites:

• Applicants must be between the age of 18 to 75 years.
• A monthly net income of Rs. 20,000 is required.
• At least one year of experience with the present job is required.
• He should be a salaried person, working for a government agency or a private enterprise, or can be self-employed.

You will need to supply specific documentation to establish your eligibility. Though each lender will have their own set of documentation, the following will be common:

Note: Double-check the lender's requirements for papers. The paperwork you'll need will also vary based on your situation.

Know more about Documents required for Car Loan

In general, the following features and benefits are attached to car loans in India. Please keep in mind that the following is a broad overview of the benefits of car loans. Car loan lenders may have highly personalized and specialized products for their customer base on an individual basis.

• It enables you to buy a car even if you do not have all of the necessary funds.
• The majority of auto loans will cover the car's on-road cost.
• Some car loans will even cover the entire cost of the vehicle on the road. This implies, there wouldn’t be any down payment.
• You are not restricted in your selection of cars because some banks offer car finance in the crores.
• In India, the majority of vehicle loans are secured. This means that the car doubles as the loan's security/collateral.
• When compared to other loan products, obtaining a car loan is relatively simple. Individuals with less-than-ideal credit ratings may also be able to get one. This option, however, varies from bank to bank.
• Fixed interest rate car loans are popular in India. This means you'll always know how much you'll owe and when you'll have to pay it back.
• Many lenders base their interest rates on your credit score; thus, a good credit score will earn you a better loan.
• Car finance aren't just for brand new vehicles. A used auto loan can assist you in purchasing a previously owned vehicle

When making a more significant purchase, such as a car, we frequently take loans to finance it. You should always opt for cheap car loans / car loan with a low-interest rate. Personal loans and car loans are two of the most popular and widely used financial solutions for customers.

A personal loan could be used for just about anything. Mainly in the case of personal loans, there are no contractual obligations. But loan against car, on the other hand, are exclusively used for car purchases. You can compare the benefits and drawbacks of both items to gain a better understanding.

Pros and Cons of Personal Loans

• There are no limitations on how the loan money can be used. The loan money can be spent on whatever you like.
• It allows for payment arrangement flexibility.

• Because a personal loan is an unsecured loan, the interest rate is typically higher
• Personal loans have more stringent lending standards due to their unsecured aspect
• Your credit score is very important in finding out your loan eligibility

Pros and Cons of vehicle loans

• Vehicle loans typically have a lower interest rate
• A vehicle loan is usually easier to obtain
• Because it is a secured loan, someone with a poor credit score will likely get approved
• The automobile is used as collateral for the loan

• A down payment needs to be made
• After the bank has made the payment to the dealership, the vehicle will be hypothecated to the bank, and you will gain complete ownership of the vehicle only after all EMIs have been made

However, it is recommended that you compare various loans available with different lenders and then select the one that best meets your needs.

A few essential criteria will determine the amount of Equated Monthly Installments (EMIs) you pay using a car loan EMI calculator:

• The amount of money borrowed.
• The rate of interest for the chosen loan product.
• The loan's duration
• Fees for processing the loan

Note: Your EMI will be higher if the loan amount is higher. Similarly, if you take a loan for a shorter tenure, the EMI would be higher. Check out our auto loan EMI calculator to find the optimal balance between a low EMI and a long repayment period.

Let’s see what are the Dos and Don’ts of the right car loan finance.

• Compare car loan possibilities on any credible online site.
• Choose a loan with the best interest rate available for the loan amount you require.
• Keep things simple - Before applying for a loan, pick a car and ensure the price suits your budget.
• Hidden Charges - There are instances when something that appears to be obvious has a hidden component. Be mindful of any hidden fees or charges associated with your car loan.
• Special offers- When applying for a loan, be aware of any special offers that may be going on for this product. Make sure you take advantage of these opportunities.
• Insurance- Check the car's insurance premium, as this is an ongoing expense.

• Eligibility - make sure your loan amount does not exceed your eligibility; otherwise, your loan application will be rejected.
• Several Applications - Do not apply for loans from many banks because this can lower your credit score.
• Don't keep applying to other banks if your application is refused. The likelihood of rejection will increase.
• Do not always trust your dealership for loan deals - The loan offered by the dealer may not have the best interest rate. So, take a look at the alternative options.
• Always suggested not to buy a car with high maintenance costs because you already have an EMI and insurance premium to pay.

Financial experts advise that if you have bad credit, you should always take out a short-term loan. Even while the monthly payments will be lower, the interest rates on long-term loans will be substantially higher. If you have bad credit, interest rates are generally high, and long-term loans will make it even worse. Another danger associated with long-term borrowing is negative equity. When the value of the car is less than the loan amount, negative equity comes into effect. The likelihood of the car requiring maintenance throughout the loan period rises as well. Depreciation occurs over time, and this results in higher costs.

To know more If you should get a loan for a shorter period or a longer period?

When you apply for a car loan, can be a new or used car that you've been considering for a while; a pre-approved loan is a way to go. To get a loan like this, you can take a few steps to get the money you need immediately.

• Look over your credit report. You can check your credit report to see how your credit score is doing. A credit score of 750 or higher may qualify you for a cheaper interest rate. A credit score of 650 to 750, on the other hand, will have a somewhat higher interest rate. Your application may be refused if you have defaulted in your report or have a very low score.
• Keep track of your bills and pay them in time. You must have a minimum monthly pre-tax income and a tolerable debt-to-income ratio to qualify for a loan to buy your dream car (DTI). While changing one's income is usually impossible, you can lower your DTI by paying off all of your outstanding credit card loans.

There are many factors to get a maximum car loan approved. The most important element to keep in mind is to constantly pay your payments on time to improve your credit score. If this is not possible, you can pay your expenses on time for at least 6 months before applying for a loan. When you pay your payments on time, the lender knows you'll pay your Equated Monthly Installments (EMIs) on time as well. As a result, you will have an easier time obtaining a loan.

• Look at car financing options. Various loan alternatives are available on the market to help you finance your new or used car purchase. You should compare the interest rates of various banks and vehicle financing companies to choose the one that best suits your demands.
• Borrow as little money as possible. You can minimize the amount you will have to borrow to match the price tag of the car you have chosen by paying a significant down payment upfront. You will be in a better position to repay your loan quickly if you borrow a smaller amount because smaller loan amounts equal cheaper EMIs or a shorter loan term.
• Make sure to pick a plan that fits your budget. An applicant's ability to pay back a loan significantly impacts whether or not the loan is approved. If you decide to take out a loan to buy the car you've always wanted, be sure you choose a repayment plan that you can sustain. If you have other loans for which EMIs need to be paid, then ensure that you will be able to pay the installments on the car loan as well.
• Pay close attention to the loan's terms. You might not be able to afford a car loan with low monthly EMIs but a longer-term. Before deciding on a financing plan, you should always strive to choose one with the lowest interest rate and the shortest loan term available. Ensure that the loan terms are clear to avoid being duped into an expensive payment position.
• Get a full coverage car insurance policy. The main concern of banks and NBFCs when making a loan is not to lose money. Since a result, many organizations need full-cover insurance before granting an automobile loan, as it aids in the recovery of the remaining debt in the event of an accident in which the borrower is responsible.

Read more about The Factors impacting car loan approval In India.

You can pay it back in equivalent monthly installments (EMIs) until the loan is paid off when you take a car loan. You will be foreclosing or prepaying your loan if you elect to pay off the outstanding loan amount before your term finishes. Most lenders charge a penalty fee for foreclosure/prepayment, while certain lenders may allow you to foreclose/prepay your auto loan without paying a fine.

If your income has grown and you want to get rid of your debt, you can foreclose on your auto loan. It also relieves you of the responsibility of making monthly EMI payments. When an automobile loan is foreclosed, the hypothecation on the vehicle is released, giving you full ownership.

As mentioned previously, some lenders may impose a penalty if you prepay the loan. As a result, it is a good idea to read the conditions linked with the loan thoroughly before deciding to foreclose on it.

You can receive a top-up loan on your existing auto loan if you need rapid or additional funds after taking out a car loan for things like a wedding, house remodeling, medical emergency, and so on. As a top-up loan, you can get up to 150 percent of the car's worth. Most lenders who offer auto loan top-ups will want you to have a clean payment history for at least 9 months. The procedure for obtaining a top-up loan on an existing car loan is simple and needs little paperwork.

HDFC Bank, Axis Bank, ICICI Bank, and Kotak Mahindra Bank are some banks that offer vehicle loan top-ups.

Auto refinancing is when you take out a new loan to pay off the remaining debt on an old car loan. If you want to replace your current loan with a better one with superior features like low-interest rates, longer payback terms, etc., or just change the conditions of your existing loan, you can refinance it. People refinance their auto loans for various reasons, the most prevalent of which is to save money. When you refinance a car loan, you can get a new loan with reduced interest rates, allowing you to save money.

You can also reduce your equivalent monthly payments (EMIs) by refinancing your automobile and choosing a longer repayment term with a different lender.

When interest rates have dropped since you took out your original vehicle loan, your financial situation has fallen, you are unable to take the strain of high EMIs, and you believe you did not obtain a decent deal on your auto loan the first time around, car refinancing is an excellent choice. However, refinancing a car loan is not a good idea if you have already paid off a significant portion of your original loan. Your car value has depreciated, the prepayment penalties are hefty. It is not a good idea to go for refinancing if you plan to apply for new loans in the future, as it negatively influences your credit score.

Buying second-hand car is highly popular in India. If you want to buy a used car, you can choose from a variety of second-hand car loan alternatives. Used car loans are available from most non-banking financial companies (NBFCs) and banks. However, there are some factors to consider when purchasing a used automobile on credit. Before choosing a bank or a non-bank financial institution, you should evaluate the interest rates offered by various banks and NBFCs. The loan term must also be carefully determined. Even if the EMI amount would decrease as the term lengthens, interest rates will rise. The interest rate on used auto loans varies between 8.8% and 17 percent.

It's also crucial to look at the processing fees that are charged. A hefty processing fee is charged by some of the NBFCs and banks.

Financing and leasing are two options for purchasing a new vehicle. The car owner/lessee would have to pay the monthly payments in both circumstances. The bank/leasing business would also own a portion of the vehicle.

There are significant distinctions between leasing a car and purchasing one with a loan. Some of the differences are given below:

• People who want to change cars every 3-4 years may find leasing a car to be more cost-effective than financing one. The lessor takes care of the burden of upkeep in this way.
• The lessee can return the car to the leasing firm at the end of the lease period. He or she does not have to go through the formalities of car valuation and sale as he or she would if the vehicle were his or her own.
• When you lease a car, there is a limit on how far you can drive it. When you possess a financed car, you are not subject to these restrictions.
• Another downside of leasing a car is that you won't be able to modify it according to your specific tastes.