Car Loan FAQs

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To own a new car you have always dreamt of has become so easy with banks offering loans up to 100% of on-road cost on select models, and up to 90% of the ex-showroom price on others. Bank also give a flexibility in repayment options and tailor-make the loan to suit your needs. So a drive in your dream car is just a click away with minimal paper work and attractive interest rates.

1 Who can avail of Car Loans?

New Car Loans to the following:

Salaried individuals in the age group of 21 to 60 years (at the end of the tenure)

Self-employed individuals in the age group of 21 to 65 years (at the end of the tenure)

Partnership Firms

Public & Private Ltd. companies

HUFs and Trusts

  1. How do I get an car/auto loan?

You can shop for a car loan right here at BankBazaar.com. We are an online loan marketplace who provide the best loan offers in 12 minutes flat, based on your eligibility. You can zero in on your choice of loan offer and apply directly online to the bank. The bank personnel will then come over at a convenient time to collect the documents and process your loan.

  1. How do I calculate the amount of money I should borrow for my car/auto loan?

You need to calculate the amount of money required based on:

  1. cost of the car based on make, model and colour.
  1. amount and type of insurance cover you wish to opt for. (Only a few banks cover the insurance)
  1. the kind of car accessories you wish to purchase for your car etc. (Please note that not all banks fund you for accessories).
  1. down payment for the car, which you will be paying upfront based on which you can calculate the remainder of the loan amount needed.
  1. percentage of financing available for the car depending on the make and model. This aspect varies according to the lender/bank’s discretion. Some banks offer up to 90% financing for new cars.

A few other banks may offer loans for second hand cars as well and the amount of financing they are willing to offer again largely depends on the car’s resale value and differs across banks/lending institutions.

  1. How much money can I borrow?

You can borrow as much as you can repay. This in banking terms would mean an auto loan, which has an EMI that does not exceed 40% of your monthly take home income, where the EMIs for existing loans are also deducted.

For self-employed applicants, the profit is the benchmark that determines loan value. The longer the time frame for repaying the loan the lower the EMI and this also means you can opt for a larger amount. The loan amount you are eligible for is also dependent on other factors like the company you are employed with, residence and credit history.

To know how much money you are eligible for and to compare banks and figure who offers you the best deal log on to BankBazaar.com where you have instant access to the best loan bargains.

  1. Can you specify the borrowing range for an car/auto loan?

The borrowing range varies across different financial institutions and also takes into account the applicant’s credit profile. However, the minimum amount for a car loan is Rs.1 L and the maximum depends on the income and other credit profile details of the applicant. Some banks offer around 3 times the annual salary of the applicant in case of a salaried individual and around 6 times the annual income in the case of self employed professionals.

  1. What is the minimum and maximum tenure of car/auto loan?

The time frame for most car/auto loan repayments ranges from 1 year (12 months) to 5 years (60 months), a select few offer 7 year tenures as well.

  1. Can I get 100% financing for my car?

It is possible but not all banks offer such an option. Those banks which offer 100% financing will do so subject to certain terms and conditions and reserved only for certain makes and models of cars. These aspects are based on the discretion of the bank. Mostly this is applicable only for new cars.

  1. Is it essential to have a bank account with the bank that offers me a loan?

It is not required to have a bank account with the bank who provides you the car loan. However, it might have certain advantages like a faster processing time and benefits like a top up loan of the original loan value provided upon request etc. in some cases.

  1. What are the documents required to process the loan?
  1. An identity proof namely a copy of the passport or PAN card or Voter’s Id or driving license.
  1. Income Proof in the form of usually the latest salary slip with the latest income tax forms (Form 16 in the case of the salaried individual, ITR form in the case of a self employed individual).
  1. Residence Proof in the form of a Ration card or Driving license or Voter’s ID or Passport copy or telephone bill or electricity bill or life insurance policy or PAN card.
  1. Sometimes optional : A copy of the bank statements pertaining to the most recent and relevant time frame.
  1. What is the normal processing time for a car/auto loan?

Once the relevant documents are submitted to the bank the loan begins to get processed. Ideally it takes anywhere between 2 to 6 working days for a loan to get sanctioned.

  1. Is it essential to give any security or collateral for my car/auto loan?

The car/vehicle you purchase using the loan by itself is the security for the loan. You will be pledging the car in the bank’s name and to that effect it needs to be indicated in the RC (Registration Certificate) book of the vehicle as well.

  1. What is a credit report and how will it affect my loan application?

A credit profile basically tracks your credit repayment record and gives a rating based on how you manage your credit and how it affects your net worth. It is an established record that lets the bank know if you are capable of repaying the money borrowed from them based on your past record. This will definitely have an impact on your loan application. If have defaulted before but managed to repay your previous loans, then though your loan may not be rejected, you may end up having a comparatively higher interest rate than a person who has a good credit score.

  1. Will it affect if this loan is my first?

If you have no past credit record based on your new loan, a new record will be created. Your eligibility will then be calculated based on your income, place of employment etc.

  1. If my income and budget does not support a particular loan amount, then can I opt for a joint loan with someone else?

Of course you can. You can club the income of your spouse or a parent and take a loan based on the combined income. In this case, the spouse or parent becomes the co-applicant of the loan.

  1. Do I need a loan guarantor?

No, a personal guarantor is not a must for your car loan. It is applicable only during instances where your credit profile does not match the lender’s requirements. Even then this can be taken care of by simply taking on a co-applicant.

  1. What is the difference between a guarantor and a co-applicant?

Both the guarantor and the co-applicant is responsible for the loan taken from the bank. A co-applicant has to repay his or her share of the loan to the bank. On the other hand the guarantor agrees to repay the loan on behalf of the loan applicant if he defaults on the payment.

  1. How do I compare loan offers from different banks?

You need to consider the total loan cost or total money outgo in the case of each offer. This is because even if the EMI is a little lesser other factors like processing fee, advance EMIs, service charges, registration, insurance and other bank charges have to be factored into the total loan cost to help you arrive at a decision on the best and cost effective loan offer. Search BankBazaar.com for the best loan offer. Here, the total loan cost is displayed upfront making it transparent and easy to compare the loan offers based on your eligibility.

  1. When can I prepay the loan? Is part prepayment possible?

Most banks have a time frame or 6 months to a year only after which you can prepay the amount. Usually, in the case of a car loan part prepayments are not allowed, you can only prepay the remainder of the loan amount in full.

  1. How do I repay the loan ?

You can repay the loan by equated monthly installments. You can calculate how much EMI you need to pay right here at BankBazaar.com.

  1. What is an EMI ?

EMI or Equated Monthly Installment is nothing but the amount arrived at by combining part principal and part interest to be repaid by you to the bank. At the end of the loan tenure this amount, which is constant throughout the loan repayment period will add up to the total principal and total interest respectively to be repaid to the bank. You can find out how exactly this break up of the principal and interest looks like by utilizing BankBazaar.com’s EMI calculator.

The EMI is always paid up to the bank or lender on a fixed date each month until the total amount due is paid up during the tenure.

  1. What mode do I use to repay the EMI?

There are quite a few options for you to repay the EMI. The normal practice is to provide your bank with post dated cheques (PDCs) for the entire repayment period at the time the loan is sanctioned. You can also make ECS (Electronic Clearing Service) payments, which will enable the bank to debit your bank account at a particular date every month towards your EMI payments. Another option is to take the installment directly from you salary where an agreement has to be made between the bank and the employer.

  1. Is it possible to stall paying my EMIs by a few days?

Generally the EMI is always paid up to the bank or lender on a fixed date each month until the total amount due is paid up during the tenure. However in certain unavoidable circumstances, it is possible to delay your EMI payment by a few days but you need to keep the bank informed in advance. Also, the bank will in most cases levy a late payment fee for such delays.

  1. What happens if I put off paying some of my EMIs ?

Adhering to such practices will cause a dent in your credit score. Frequent and continuous late payments will result in a default. This will make borrowing in the future a difficult task and even if future loans are sanctioned it may be given only at high interest rates owing to your dented credit score. Also, you need to factor in the compounding late payment charges which may add up to a significant sum. Another serious aspect is the fact that if these pending dues mount, your car can be seized without further ado, adding to the list of disadvantages of such a practice, which is best avoided.

  1. How is the interest on my loan calculated?

Interest rates are quoted either as fixed flat rates or reducing balance rates.

In the flat rate method of interest calculation, the outstanding loan amount is never reduced during the entire tenure of the loan even though you make payments monthly.

In the case of reducing balance interest rates the EMI is calculated on the basis of daily, monthly, quarterly or annual rests.

A ‘rest’ indicates the time frame in which the bank will recalculate the EMI based on the amount of loan paid back.

  1. Can I negotiate with my bank for interest rates?

It is possible to reduce interest rates based on negotiation with the bank. At BankBazaar.com we save you this trouble as well, offering the lowest and best interest rates available enabling you to compare your loan offers instantly and make an informed decision.

  1. Can I opt to sell my car before my loan repayment ends?

This is not possible as you have pledged your car as security for the loan. If you must do so to perhaps close the loan early, then you will need to obtain an NOC (No Objection Certificate) from the bank.

  1. Can I prepay my car/auto loan?

Yes, you can repay your car loan. However banks charge a prepayment penalty charge for this. Make sure the interest you save makes sense after you factor in the prepayment penalty charge.

  1. In the unfortunate event of a car accident what happens?

The insurance company needs to be notified of the accident. Once a surveyor does an assessment of the the damages to the car the claim is processed. If you have been very regular with your payments the bank normally provides and NOC to you, where by the insurance company makes a payment in your favour else it happens in the bank’s name. In the event of a complete loss the insurance amount is paid directly to the bank and a settlement is made to you depending on the loan amount you have repaid during that time frame.

  1. Will my loan finance my insurance and registration charges as well?

Only very few banks finance these aspects. Usually the ex-showroom price is considered for the loan amount and not the on-road price that includes insurance and registration charges.

  1. What happens after I complete the repayment of my loan?

When the last EMI has been paid the bank’s legal claim to the car ceases to exist. The bank will issue Form 35 with an NOC to the RTO canceling the bank’s name from the RC book. The same process is followed for your insurance policy as well.

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