Availing Car Loan Tips for First Time Aspirants
Possessing a ‘dream car’ has become has become a key integral component of modern lifestyle. However, due to financial constraints, sometimes it remains a distant dream to own one 4-wheeled aspiration. Naturally, car finance schemes come to the rescue to realize that desire. In the below section, we will discuss some handy tips for first time ‘car loan’ aspirants.
Car Loan Tips:
1. Understand different loan schemes: Since majority of the Indian PSU and private sector banks and financial institutions offer loan to purchase cars, it is suggested to check their website to get a clear understanding about the pros and cons of different loan schemes. Most of the well-established car dealers have tied up with top-grade banks/financial institutions to offer car finance. Moreover, eligibility criteria also vary from bank to bank; HDFC car loan and PNB car loan contains different criteria to some extent. So, one cannot pick up the suitable loan scheme until he checks with different banks.
If you are looking for availing car finance via PNB then the car should not be older than three years. Its depreciation value is calculated at a rate of 15% p.a. on current / showroom invoice. To become eligible for PNB car loan the applicant’s net monthly income should be at least Rs. 20000/ (including income of spouse or parent). In the case of SBI car loan it is Rs. 2, 50,000/ (annual income).
The interest rate for new car loan generally ranges from 11.25% - 13%. However it is slightly higher for ‘old cars’. Say for example, SBI car loan scheme old cars with up to 3 years age carry an interest rate of 7.25% above Base Rate(10%) i.e. 17.25% p.a. while it is 7.50% above Base Rate (17.50% )p.a. for cars of more than 3 yrs.
2. Deposit handsome down payment: It is better to ‘look before you leap’. So, never blindly go for a loan unless you accumulate substantial money as ‘down payment’. It will lessen your EMI burden in the longer run.
3. Stress upon the transparency: To avoid ‘Goosebumps’ with additional expenditures during processing the loan always make sure that you have clearly understood every aspect in this matter. For example, PNB car loan upfront fee and documentation charges are calculated at 1% rate of the loan amount with an optimum level of Rs.6, 000/- (exclusive of service tax and education cess). Apart from the regular EMI rate you should also take note of the additional charges in case of any default while repaying the car loan.
4. Safeguard your car’s future with insurance coverage: Irrespective of the monetary value of the car, every vehicle acts as prized possession of its owner. Car insurance coverage plays a crucial part in assuring the owners about the safety of their possessions. Since Indian roads witness major accidents on regular basis, involving automobiles, there is no second-thought about availing an insurance policy.
5. Choose the right finance scheme as per the merit: There are three ‘top priority’ financial scheme patterns in the car loan parameter. They are:
- Margin money scheme: This scheme requires the borrower to pay a certain portion of the actual car price as down payment. The interest rate is calculated on the remaining amount, i.e. - the Loan to Value (LTV) ratio and is charged on a monthly basis.
- Advance EMI scheme: Under this scheme the bank/financial institution provides the 100% cost of the car as loan but the borrower is required to pay certain portion of the amount as advance EMI.
- Security deposit schemes: Under this scheme, the bank offers 100% loan but takes a certain percentage from the borrower as security deposit which is returned on successful completion of loan repayment cycle.
In spite of several ‘attractive’ car finance schemes always judge your financial condition before materializing your dream at high price that may put your domestic expenditures at stake. You will not get ‘unlimited’ years to repay the loan. Indian banks generally offer loan repayment tenure of 1-5 years though some of them give the option of 7-year tenure. In case of super-premium car the tenure is shortened (generally 3 years). Availing a car loan is a fantastic idea towards becoming a proud owner of 4-wheeled dream but it needs enough preparations.