Car Loan In India
With the purchasing power of numbers of people in India increasing rapidly, purchasing a car has become almost a priority for them. This leads them to car loans, which enable them in buying the vehicle of their dreams. However, it would be wise to take all the aspects of these loans into account before you finally make the application.
When deciding on the loan amount, note that banks in India provide 2 to 3 times the annual salary of the applicant or 6 times the annual income of self-employed people for buying a car. To purchase a new car you can get 90-100 percent amount of its ex-showroom price. As for used car, the loan amount is kept 80-90 percent of the car price. Your relative’s or spouse’s income also can be included in the assessing your repayment capability, if your income is not sufficient.
The banks will take the car as security against the loan. This means that while you own and drive the vehicle, it is actually being used by the lenders for the purpose of security. In turn it implies that some crucial papers of the car will be returned to you only when you have completely paid back the loan.
As far as interest rate is concerned, it depends on your past good or bad record of paying past loans. However, irrespective of the record, you can assure a low rate on the loan once you have made a good amount of down payment to the lender. Repayment of the loan can be made in 5-7 years.
The documents required for car loans in India include identity proof, proof of residence and income proof. Salaried people should submit their latest salary slip, form 16 and bank statements of last six months. If you are a self employed one then bank statements of last two years will serve the purpose of income proof.
In India car loan is given for new cars, pre-owned cars and car cash-in. There is no upper limit for the amount of a car loan. A maximum loan amount is 2.5 times of your net annual income. Moreover loan can be applied jointly in that case your spouse’s income can also be considered. The loan amount for new car includes finance for one-time road tax, registration and insurance premiums. There is no ceiling on the loan amount for new cars. You have to deposit margin money for new car loan and in some bank for used car loans also. For instance State Bank of India (SBI) country’s largest lender takes margin money on new/used vehicles: 15% of the on the road price.
The eligibility criteria for availing car loan for instance from SBI is:
- The age of an individual seeking for loan should be between 21-65 years of age.
- A Permanent employee of State / Central Government, Public Sector Undertaking, Private company or a reputed establishment or
- A Professionals or self-employed individual who is an income tax assesses or
- A Person engaged in agriculture and allied activities.
- The net annual income of an individual must be Rs. 100,000/- and above.
The maximum repayment tenure SBI has fixed for a salaried person is 84 months and for the professionals and self-employed is 60 months. As a processing fee 0.50% of loan amount has to be paid upfront i.e. minimum amount is Rs. 500 and the maximum is Rs. 10,000. In case of rejection of application after pre-sanction survey 25% of processing fee is retained.
Private sector banks like HDFC Bank, ICICI Bank, Citibank also provide car loan for various models such as Citibank gives loan up to 90% of the car value, for a new Maruti car and 85% of the value of the pre-owned car you want to buy.
The process of the car loan is enhanced to large extent by bringing some solid down payment and security to the table. The greatest setback for banks in India is that they cannot force the borrowers in a torturous way. The fact is that banks don’t want to be a loser in any way and therefore they want to be fully assured from all sides. But for the borrower it would be wise to visit various banks enquire about the process and provisions and the rate of interest. And the choice depends on satisfaction and viability.
In recent times it has been seen that many loans have been cancelled just on account of the credit crunch. Therefore, it is necessary to uphold credit in the market by hook or by crook. All the same, it is not discouraging any way to get car loans. The dream of enjoying a cozy drive is no way to be scrapped. Only the prerequisites have well furnished with a good credit report and something which can prove a borrower a safe risk in the eyes of a bank.