If you are looking for a new or a second-hand car, there are lots of financing options available in the market. Before taking a car loan, it is important to know about car loans and how it works. A Car loan is also the fastest medium of getting a loan; for a short term gap or a need that one wants to overcome. A Car Loan / Vehicle loan can be taken from a Bank / Non-Banking Financial Institution.
What is a Car Loan?
A car loan is a loan that is taken for the motive of buying a vehicle; either new or second-hand for personal / commercial. It is a Secured loan taken against the vehicle you propose to buy or an existing vehicle you own.
New Car Loan
When you have identified which car to buy; you can either look up various options for finding the best bank and product suitable to your need and apply. You can also approach consultants like us; who can guide & manage the entire process for you. You can get up to 100% of the on-road price of the car. This payment is made directly to the car dealer’s account and the car is hypothecated to the lending institution.
Used Car Loan
For a used car loan; you can avail up to 125% of the car’s cost valuated by the bank.
Age of the Vehicle– The age and condition of the vehicle is a very important factor that the lenders consider when offering a used car loan. By the model and condition of vehicle lenders determine the actual value of the loan to be given against the vehicle.
Factors of Car Loan Approval in India
Cibil Score- CIBIL score plays a key role when it comes to car loan approval in India. The Cibil score is a three-digit numeric summary of your credit history, rating and report, ranging from 300 to 900. The Score is derived using the credit history found in the CIBIL Report (also known as CIR; Credit Information Report). It is a report tracking detailed information on the credit you have availed; secured (Home loan, LAP, Automobile loan) or unsecured (Personal Loan, Credit Card, Business Loan)
The CIBIL score is given by TransUnion CIBIL Limited, formerly known as Credit Information Bureau (India) Limited. A score above 700 is usually considered good.
Repayment period- The Car loan repayment period in India usually comes between 1 to 7 years. It is comforting for the borrower to decide what payment term he or she would like to opt for. The return period is a crucial factor in deciding monthly EMIs. If the duration is longer, the EMIs are lower and if the duration is shorter, the EMIs will naturally be higher. However; it is better that buyers fix the short payment period as they would otherwise have to pay higher interest rates.