An auto loan can be sanctioned for the purpose of purchasing a new car as well as a used car. A loan can be taken by a borrower for purchasing commercial vehicles like a truck or bus, which is generally referred to as a commercial vehicle. A new car loan is granted to an individual for the purpose of purchasing a vehicle directly from the showroom, whereas a used or pre-owned car loan is a loan that is given for buying a second-hand car that should not be more than three years old.
An auto loan is provided by banks (like Bank of India Car Loan) and NBFCs which can be availed up to a rate of 90% of the invoice value of the vehicle. Sometimes some lenders go to the extent of providing 100% of the car’s value based on the make and brand of the vehicle that is to be purchased. The invoice value refers to the showroom price, and it does not include the showroom price and does not even include the registration, insurance and other related costs.
The loan tenure on an auto loan ranges from a time period of 1 to 7 years. Although, auto loans have a shorter repayment period than home loans since the loan amount is relatively more minor. And the rate of interest is fixed for the time period of the auto loan scheme so that one can have the same monthly outflow for the entire tenure of the loan. This will help an individual to plan one’s personal budget and make all their payments.
An auto loan is a form of secured loan as it is offered to an individual while purchasing a car which is used as collateral or security in case there are any defaults in the repayments. The vehicle is hypothecated to the lender till the loan is completely paid off. Once an individual pays off the loan in full, the bank transfers ownership of the vehicle to the borrower. But if he or she fails to repay the loan in full, then at the end of the loan period, the bank or the lender can dispose of the vehicle to recover their dues. Further, we will look into the eligibility criteria of getting a car loan to approve in India from one or more banks :
I. Maximum and minimum age - The minimum age for applying for an auto loan scheme is 18 years, and the whole age criteria are 65 years. However, there are many banks that require a minimum age of 23 years.
II. Loan amount - A loan amount of up to 50 lakh is generally sanctioned as a car loan. Some banks and NBFcs also go to the extent of providing a car loan of INR 1 crore. The loan amount is dependent upon the value of the car and the EMI that one can pay.
III. Net monthly income - If a borrower is willing to avail of a car loan, then he or she must have a minimum salary of INR 18,000 per month.
IV. Employment type - An auto loan scheme is available for salaried individuals, self-employed individuals, as well as businessmen. Interest rates can range from 9.25% to a maximum of 20%.
V. Minimum work experience - For salaried individuals, the minimum work experience must be of 1 year of the total. In the case of self-employed individuals, the business existence must be of a minimum of five years, and for ITR, it is a minimum of 2 years.
VI. CIBIL Score - A CIBIL score of 700 or more is considered to be suitable for availing of a car loan.
Lastly, it is suggested by advisors that one should search the market and do their research work before availing an auto loan. One can make use of auto loan calculators in order to compare the Car Loan Interest Rates and avail of the best deals.
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