A car loan is a personal loan that allows the potential buyer to pay the vehicle off in monthly payments instead of having to pay the full price all at once. This means that a bank or financial institutes, will pay off the car in full, while in return the borrower pays off the debt in monthly payments with an interest fee included as well, but for the most part banks will usually offer a loan that is secured just in case the borrower falls behind on their payments and fails to pay off the debt. If the borrower fails to pay the monthly payments, their lender will repossess the car to pay off the debt. To qualify for an unsecured loan the borrower must have a very high credit score and also issue a higher interest rate on the loan as well.
If you are deciding whether or not to get a car loan, it is wise for you to first calculate your income and expenses. You do not want to get a new loan if it does not fit into your monthly budget, you are just acquiring even more debt than you already have. Also it is important think about all of the additional fees that will come along with the vehicle such as fuel, maintenance, taxes, and registration. If possible, you should put down a higher down payment than required because this will help lower your interest rate and monthly payment altogether.
Remember, it is very important that you always make your monthly payments if you get a car loan. If you fail to make these payments the bank may be able to come after you and repossess your vehicle, leaving you with no way to get around. Even with unsecured loans the bank will come after the borrower, usually by suing them for the remaining debt. Also any missed payments will be reported to the credit bureaus and the borrower will notice their score begin to drop.
Even a used car can make a severe dent in your bank balance, which is why many people opt to apply for a car loan to pay for their purchase. But quite apart from the fact that car loan enables you to keep your savings where they belong - namely in your pocket - it also has several other advantages over a cash transaction.
Firstly, it enables you to buy a better car than you could otherwise afford. Trying to save money by buying an older model can result in more costly repairs being needed, which all amounts to a false economy in the long run. Taking out a car loan also means you can spread the cost over a longer period of time, which in turn makes your car much easier to pay for - and you will always know where you stand with your monthly payments. You'll also know exactly how long you'll be paying the loan for until it's completed.
If the car credit you get is either unsecured or secured on the car itself, it's a very low risk option - much more attractive than a secured loan, which could put your home at risk should you default on payments.
Car finance is often also easier to successfully apply for than any other bank loan. Many people who have bad credit problems are still able to get a car loan and if you are unable to buy a car in any other way then yes car credit could change your life.
Up to 100% Funding
3 - 7 Year Loan Tenure
30 Minute Approvals
Car loan is also better than a standard loan as it often comes with added perks. For example, if you buy your car from the same company that provides you with the loan, they may add in six month's free road tax or a full vehicle inspection before you drive the car home. These give the loan added value that you wouldn't be able to get elsewhere.
Car loans in India often utilize the fixed interest rate option when it comes to repayment via EMIs. This means, you are always assured of a fixed amount that needs to be repaid on a monthly basis. This takes the surprise out of the financial planning that goes into the car purchase process. Thank god for that. The actual maximum loan amount depends on the vehicle to be purchased and varies from bank to bank. Mostly however, this is 100% of the vehicle’s on-road price. The repayment tenure usually stretches from 5-10 years and offers different interest scales for different tenure slabs.
So if you are considering buying a new car, opting for car loan to make it possible could well be your best choice. Not only can it bring added benefits, but you'll always know exactly where you stand. Most importantly, a car loan helps you buy your dream car. Aside from being a purely transport option, the car serves as a confidence booster and your means to assert the hard earned financial freedom.
Whether you buy new or used, it's wise to get pre-approved for a loan before you ever step on a car lot. Go to your bank or any financial institute and verify if you are eligible for a car loan and how much. The agent will check your CIBIL score and other obligations and provide you with an amount and interest rate. CIBIL score can be between 300 and 900. The higher the score the lower the interest rate you will be offered. People with a bad credit history may pay interest rates that are more than double prime rates. Armed with a pre-approved loan you are now in control and have a choice to go with dealer financing or stick with your bank, whichever rate is lower.:
Car Loan Approved.When it comes to borrowing money, a wise shopper looks at the total cost of the loan, and not just at the monthly payment. Too many advertisements state only the monthly payment. You need to dig deeper to see the real story. In general, a lower interest rate will cost you less money. A 5,00,000 loan at 14% for 48 months (4 years) will cost you a total of 6,55,835/- whereas the same loan at 11% will cost you 6,20,293. That's a savings of 35,542 which is equivalent to six months fuel charges for an average indian customer.
Another key consideration is the term of a loan, which can significantly affect both your monthly payment and the total cost of your financing. A shorter term means higher monthly payments but less money paid overall. Try to keep the length of the loan as short as you can afford. Let's take that same 5,00,000 loan above at 11% at 5 years will cost you around 6,52,273 and see how much we can save by paying it off in 3 years. So, 5,00,000 at 11% for 36 months will cost 5,89,297 saving you 62,976. Using the emi calculator you will see that the monthly payment for the 5 year loan is 10,871 and the monthly payment for the 3 year loan is 16,369.
A three-year loan costs far less overall than a five-year loan If you can easily handle the higher payment the savings are well worth it, for a 5 year loan of rupees 5,00,000 at interest rate of 11% you end up paying 1,52,273 in interest whereas in 3 year you pay 89,297 in interest a saving of 62,976. And that doesn't even take into account that longer loans often have higher interest rates.
Another concern with long-term auto loans is that they lengthen the time before your payments begin building equity in the vehicle. For example, with a 60-month loan, it might take 18 months of payments or longer before the car is worth more than you owe on it. This means that if you want to trade in or sell the car early, the price you'll get won't cover the amount you still owe, also called being "upside down." The same is true if the car was stolen or destroyed. Your insurance payment won't be high enough to pay off the rest of your loan.