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There was a time when owning a car was a luxury not all could afford to have. Buying a car was a life milestone for everyone who could shell out those huge amounts of money all at once to buy their dream car. With growing times, changing demographics and emerging car loan lenders, for a majority of the Indian middle class, owning a car today is no longer a luxury, but in fact a necessity made possible by taking a car loan.
You cannot imagine living without a car because that would restrict you form going places for work, duties or leisure, hindering a good social and professional life. But with newer technologies and lesser resources, the cost of cars are on a rise, often making it extremely difficult for the average individual to purchase their vehicle outright only using ones savings. Therefore, viewing the huge demand for financing both used and new cars, leading loan lenders in India offer car loans, which are floated products, which enable you to purchase your car and pay off the car loan amount borrowed bit by bit through car loan EMIs or installments.
Benefits of Car Loans
In India, apart from the issue that paying such a huge sum of cash may disturb one’s budget, massive purchases with liquid cash could put you on the Income Tax department’s radar as well. When you get a car loan to pay for your car, you manage to retain your savings for other current and future expenses. One of the greatest car loan benefits in India that the loan is secured against the car itself, so, you do not have to mortgage your property or other assets to get a car loan. You also get to use your car while you are servicing the car loan term, so a few years down the line you have added to your original savings and have the opportunity to own the car having paid off your car loan completely. This gives you the chance to augment crucial credit history by procuring a car loan and strictly adhering to the repayment cycle. A good credit history including timely payments and cleared debts help you obtain further loans in the future. Car loans, therefore, are a very safe and certain way of purchasing your own car.
Car Loan Characteristics
Car loans in India generally carry the following features:
- One can opt for new or used car loan depending upon the need and the kind of car requirement. Though, most people prefer a car loan over new cars and not the second hand ones.
- Car loan option in India, for a majority, is an alternative that lets them purchase a car which is better than the one available in their budget since the car loan approval is quick.
- Car loans in India generally provide a fixed rate of interest option while repayment through EMIs. This keeps you assured of a fixed repayable amount on a monthly basis towards the car loan, facilitating better budget planning without disturbing your usual expenses.
- A bank offering car loan mostly also provide flexible repayment tenure options of 1-7 years to repay the car loan amount in regular EMIs.
- Car loans in India are often easier to avail when compared to any other loans and involves easy documentation with clear instructions and guidance throughout the full car loan approval and sanction process.
- Car loan borrowers can avail loans up to Rs. 1.5 cores, mostly comprising of 100% of the vehicle’s on-road price.
- Most banks have reasonable EMIs within flexible tenure options to offer on Car loans.
Car Loan for a Used Car or a New One
Car loans are available for not just buying brand new cars but also used ones. On the face of it, a used car is cheaper so clearly, the car loan amount required will be lower, and so will be the car loan EMIs. But in most cases, a used car requires a higher upkeep cost and there might be additional re-registration costs associated with it, neither of which will be covered by the car loan. So, for a large majority of the prospective car purchasers, approaching a bank or NBFC for new car loan options is preferred over used car loan options. Another factor is that the car loan approval is much swifter for a new car.
But buying a pre-owned car is not that bad of an option either. We here list down a few reasons why buying a Pre-used car via a car loan is a good deal too :
- First and foremost, it is immensely pocket friendly. It is obvious that a second-hand car will cost less, thereafter, the pre-owned car loan financing it will also be a lesser amount compared to its new-car alternative, meaning smaller monthly installments to pay.
- It is evident that the demand for second hand car loans is lesser that that for a new car loan. This is a reason that most banks feature used car finance as an important component in their products, thus, these products are customized and added with extra benefits to appear as customer friendly as possible. Therefore, a car loan gives lots of features and rebates but less of the hassle associated with buying a new car loan.
- And the best part, in case of a pre-owned car, the choice of models isn’t dependent on its current on-road price. The amount you invest in a new car of a particular model can buy you a higher model in the same amount or probably even lesser in case of a second-hand car of the same make. Plus, the insurance cost of a pre-owned car is lesser and the prospect of depreciation is considerably less when compared to new cars. So, you can retain its original value when you intend to resell it in the future.
Top Banks offering Car Loans in India
India, being one of the fastest growing automobile markets in the world, homes a number of auto finance companies to tap the booming market. Automobile sales account to 80% of the total passenger vehicle market and is expected to grow at a fast pace in the coming years. As a consumer, comparing car loans is a must, as that allows one to narrow down the best available options.
The increased demand for cars and car loans in India fueled by an expanding middle class has led most banks and NBFCs in India to provide car loans to people from various walks of life who keep researching for the most popular car loans available. Key providers of car loans in India include Axis Bank, State Bank of India, HDFC Bank, Union Bank, ICICI Bank and Sundaram Finance:
Unique features such as the overdraft facility and the provision of optional SBI life insurance cover has contributed to SBI car loans’ lasting popularity. For all the right reasons shared above, the SBI car loan has its vast share of loyal and enduring fans. The public sector behemoth named SBI has little competition in India, known for its people centric approach; it will continue to remain a premier choice in the years to come. Here, we sum up SBI Bank Car loan offering for you:
|SBI Bank Car Loan|
|Car Loan Amount||85% (on road price)|
|Tenure||Upto 7 years|
|Interest Rate||10.30% – 11.10%|
Other friendly aspects of the Axis Bank Loan include an attractive interest rate, comfortable repayment tenure ranging from 1-7 years, simplified car loan eligibility criteria, minimal documentation, ease of online car loan application and provision of loan to a wide demographic of individuals (salaried, self-employed, partnership firms, corporates, limited liability partnerships, etc.).Axis Bank’s popular Car Loans are widely availed amongst its target audience for its versatile car loan offerings that match upto the most discerning tastes and complies with the most budget conscious requirements. Here we sum up Axis Bank Car loan offering for you:
|Axis Bank Car Loan|
|Car Loan Amount||85% (ex-showroom price)
95% (on select models)
|Tenure||Upto 7 years|
The documentation for a car loan is minimal and high on transparency. At 75 lakhs, the quantum of financing is one of the highest compared to other bank car loans. If you’re someone aiming at a luxury car, Union Miles is one of the best car loan options available for you. The current rate of interest for new car loan is just 10.45% and 15.25% for used car loan along with fixed interest rates, based on monthly reducing balance is one of the lowest in the car loan segment. Here we sum up Union Bank Car Loan offerings for you:
|Union Bank Car Loan|
|Car Loan Amount||Up to 75 lakhs|
|Tenure||Upto 7 years|
|Interest Rate||10.45% – 15.25%|
|Sundaram Finance Car Loan|
|Car Loan Amount||85%on New Cars (ex-showroom price)
60% on Pre-owned Cars (Purchase price of the Vehicle)
|Tenure||Upto 7 years|
|Interest Rate||quotes on a flat rate basis|
The loan is offered for all makes and types of cars for personal or commercial use, available in India. IndusInd Bank offers attractive loan terms and efficient turn-around time, hassle free documentation and easy loan processing. Most importantly, the car loan repayment tenure extends up to 60 months.
|IndusInd Bank Car Loan|
|Car Loan Amount||90 % (ex-showroom price)|
|Tenure||Upto 5 years|
|Interest Rate||11.00% to 15.00%|
Guide to Choosing the Right Car Loans
Increasing consumer needs has led to car makers launching several new products with attractive features and benefiting the situation many car loan lenders have tempting deals to offer on car loans to fulfill your car buying needs. Anyone planning to invest in a new car and a car loan to go with it should be clear in the mind about which car loan to opt for before investing, to save money and time. Always remember these four loan functions-
1) The interest rate offered is a big factor affecting loan amount, which is further decided upon your credit history and score
2) Shorter terms mean lower rates and
3) Depending upon your goodwill, you can negotiate on interest rates.
Also, here’s an expert tip- if you need to save on your car loan, consider cashing out on the equity in your home or putting down a larger down payment on the vehicle to purchase the car. But how to decide on which would be a better choice? Following is a list explaining the essentials when choosing the right car loan :-
- HDFC Car Loan – HDFC bank’s schemes have always been one of the priority car loan options for every car loan borrower in India. It offers flexible loan products and existing benefits like option of pre-approved car loans, especially for HDFC bank customers. At the same time, the bank also offers competitive interest rates on its car loans with EMIs amounting to as low as Rs.1671/lakh, making the deal that much more profitable.
Apart from the fore-listed features, HDFC offers fixed Car Loan interest rates that are unaffected by market fluctuations, quick and hassle free loan processing, car loans amounting to 6x of your annual income, car loan options without the necessity for income proof and associated documents and many other features that are customer friendly and less time consuming. Car loans from HDFC bank are indeed, beneficial, affordable and worth your attention while searching for car loans. Here we sum up HDFC Bank Car loan offering for you:
|HDFC Bank Car Loan|
|Car Loan Amount||100% (ex-showroom price)|
|Tenure||Upto 7 years|
- ICICI Car Loan – ICICI Bank, known for its powerful 24×7 customer support and customer relationship management, offers funding to match 100% of the ex-showroom price of the vehicle. Their feature-rich car loans in India are unmatchable and the versatility and simplicity as afforded by the ICICI Bank Car Loan is one of its kind. Other features including loan tenure of up to 7 years, pre-approved car loans for existing ICICI customers, minimal documentation, hassle free application process and a simple option to apply for car loan online, is pleasing and call for a significant number of car loan applications every now and then. ICICI bank makes sure its car loan products are as customer friendly and approachable as possible.
The applicable interest rates on ICICI Bank car loans and the other associated charges are of great prominence for Indian customers when it comes to taking a car loan. The goodwill that the bank holds constantly gives its customer ample reasons to invest their interest in ICICI bank car loans. Here we sum up ICICI Bank’s Car Loan offering for you:
|ICICI Bank Car Loan|
|Car Loan Amount||100% (ex-showroom price)|
|Tenure||Upto 7 years|
- SBI Car Loan – Over the years, the State Bank of India has placed itself as India’s premier public sector bank and enjoys a level of trust from the general public that only a few can match upto. SBI offers intensely customer centric car loans and other products, keeping its customer reliance intact. Like others, SBI offers very competitive interest rates, comfortable car loan repayment tenure of up to 7 years and loan amounts that match up to 85% of the proposed vehicle’s on-road price with 0% pre-payment or foreclosure charges.
- Axis Car Loan – Simple car loan application procedures, customer friendly terms and conditions, robust customer support initiatives and adherence to the modern ways of personal banking sets Axis Bank apart and positions it as a premier private sector bank in the market. It offers upto 85% of the proposed vehicle’s on-road price through its car loan, and in the case of some select car models, this number can even hit a 95% of the vehicle’s on-road price.
- Union Bank Car Loan – Union Bank is considered to have one of the leading car loan offerings in India. It offers financing towards purchase of both new and used cars that are up to 3 years old. The elementary terms and conditions makes Union Bank Car Loans, one of the most obtainable car loan products in the market with benefit of a zero prepayment penalty and processing fees clauses make it pocket friendly helping you save in costs.
- Sundaram Finance Car loan– Sundaram Finance Group (SFG), having 566 branches all over India, is a leading Non-Banking Finance Company (NBFC) in India, offers a diverse portfolio of products and services. In view of the increasing growth potential of the car market, they set up car finance exclusively to finance cars and utility vehicles. Supported by a large countrywide network, strong dealer relationship and its customized service, Sundaram Finance has attained a position of strength in its area, servicing a very large customer base.
A loan through SFG can be availed by an individual- salaried or professional, a proprietor or a private/public limited company. They offer specialty packages and customized products for Women and Senior citizens and add-on benefits like flexible and customizable insurance options for all your cars. Another scheme called the money on wheels is pre-approved car loans on your existing car at attractive interest rates, far lesser than other personal loans on offer.
- IndusInd Bank – IndusInd as part of the Hinduja group conglomerate has created a niche for itself in the Indian banking industry. IndusInd Bank offers quick and comprehensive loan options when it comes to the purchase of a used car which makes it an active player in the sphere of car finance. Not just the financial services it has to offer, the bank is known for using technology to provide innovative services like video branch, cash on mobile etc.
- Compare everything
There are a wide range of options available to you and neither of them are the same and different lenders may give you different car loan quote. Finding the car loan provider who’ll provide the perfect car loan involves a moderate amount of work and research
- Know the ROIs
Rate of Interest on any loan is the biggest factor that affects your loan amount and must always be taken into notice while looking for a Car loan. Expectedly, the lower the interest rate, the better, makes the EMIs lower. However, generally, lower interest rates signify some services are missing.
- Be aware of your capabilities
Don’t fall prey to up-selling tricks at the car showroom. Keep in mind your financial limitations and a repayment capability, for repaying a loan is a big responsibility. Choose a car model that suits your budget that is in line with your regular requirements and obligations.
- Enquire about hidden fees and charges
Sometimes, what appears as obvious will have a hidden component. Enquire such charges with the car loan lender, and ask questions about any hidden fees and charges concerning the car loan, as also be cautious of time bound incentives and packages- they will expire soon and you may be left with a lesser deal than you hoped for.
Car Loan Eligibility Criteria
Almost anybody who fulfills the basic car loan eligibility criteria can apply for a car loan in India. The basic requirements to take up any loan are driven by the age, employment status and other demographical factors of the car loan subscriber along with of course, their repayment capacity. The common requirements, irrespective of the financial institution or loan amount, for an individual to be eligible for a car loan approval include:
- The borrower should be salaried, self-employed, business owner or a professional
- They should be of Indian nationality residing in or outside India
- They should be at least 21 years old and not more than 65 years old
- Should meet the minimum repayment capacity or minimum salary requirements
- They must be in the current job for one year (salaried) or two years in the same business (self-employed or professional)
Car Loan Documents Required
Several documents that establish necessary information like your identity, proof of income and residence are required for a car loan application. But out of all, the documents relating to new or old car, are the most important. The complete set of relevant car loan documents makes one eligible for loan and one cannot do without submitting the right docs.Though, the documentation requirements vary from lender to lender, following is a list of commonly asked for documents required while applying for a car loan :
Income proof documents for Self-employed persons:
- Duly signed and filled application form available either on the website or physically at the bank’s outlets
- Passport Size Photographs, generally 4-6 photos
- An identity proof which can be one of these documents- Passport, Pan Card, Driving License, Voters ID card, Aadhaar card or employee identity card in case of government employees
- Address Proof like Bank statement, Rent Agreement, Voters ID card, Ration card, Passport, Driving License, Telephone bill, Electricity or water Bills, Credit card bill or Property tax document
- Age Proof which may be a Voter ID card, Secondary school leaving certificate (class 10), Birth certificate, Passport, Aadhaar card, Pension payment order or Receipt of LIC policy.
Income proof documents in case of salaried individuals:
- Latest 3 months’ salary slips
- Form 16 with proper computation of income
- Salary account bank statement for six months
- Latest acknowledged IT return
- Business stability and ownership proof
- Last two years’ computation of income
- Profit and Loss statement
- Balance sheet certified by a C.A.
- Latest six months’ bank statement
- Last two years’ sales
- Copies of acknowledged IT returns
- PAN Card for the lender to check and verify if you are trustworthy enough to make regular repayments by your credit records history.
- Documents providing Vehicle information which may include the sales receipts from the seller.
- In order to establish that, all applicable laws and protocols are followed with regards to the purchased vehicle, the applicant must also submit copies of the Vehicle’s Motor Insurance and your Driving License.
Car Loan Interest Rates
Though like most debt instruments, car loan interest rates are linked to the base rate dictated by RBI directives, the rate does differ slightly from bank to bank. Additional factors that may affect the interest rate on car loans include the loan amount, loan tenure, your credit history and your reputation with the bank. Currently car loans are available on interest rates ranging from 10% – 15% but there are a few banks that offer it for as low as 9.55%.