Car loan means borrowing money from a bank or a financial institution for buying a new car or a used car loan or loan against car. Instead of paying the complete amount of the car in one go, the applicant pays the amount in regular installments based on the interest rate charged by the bank.
Types of Car Loan
On the basis of what type of car is the applicant interested in:
New car loans: When a person is interested in purchasing a brand new car, he can apply for a new car loan. This loan covers a wide range of cars to choose from. A person can either take the full amount of the car as loan or he can deposit some amount against the car.
Pre-owned car loans: These type of loans are for people who want to take a loan for a used or a second hand car. In this also the person can take the full amount as a loan or deposit a fixed amount against the car. Though this type of loan has restrictions on the cars on which loans are available.
Car against loan: Car against loan means taking a loan by putting your current car as a security or collateral.
Some popular schemes on the basis of how much the customer can pay:
Margin money scheme: In this scheme the person has to pay only a margin of the car’s total amount along with giving a cheque towards the first EMI and borrowing the rest of the amount from a bank or financial institution.
Hire purchase scheme: This scheme allows a customer to hire a car with an option of buying it if he is interested in buying it later. These are mostly given by non-banking financial institutions which are not allowed to lend money directly.
Security deposit scheme: In this scheme, the applicant has to deposit around 20%-30% of the loan amount as a security which is refundable after the tenure of the loan is completed or in case of prepayment of the loan.
Advance EMIs scheme: In this scheme, the applicant is supposed to pay around five to ten EMIs in advance along with post dated cheques towards the rest of the EMIs.
Lease financing purchase: This type of loan scheme is for people who want to use a car without owning it. The financial institution which lends money to the customer owns the car but the car is used by the applicant.
Compare Car Loans
After the finalization of taking a car loan, it is an important step to decide from which bank should a person take a loan. This differs for each person because of his financial capability and how he is going to use the car. Here is a comparison of some major banks who provide car loans:
|Banks||Interest Rate||Processing Fee|
|Axis Bank Ltd||11% to 12%||Rs. 3500 to Rs. 5500|
|Canara Bank||8.75% – 11.65%||0.25% on the loan amount with a minimum of Rs.1000/- and maximum of Rs.5000/-|
|HDFC Bank||11.50% to 13.75%||0.4% of the loan amount, max. Rs. 10000|
|Indian Bank Ltd||9.95%||0.229% on loan amount with a max. of Rs.10191/-|
|Punjab National Bank||9.25% to 9.30%||1% of loan amount, Maximum is Rs. 6000|
|Bank of India||9.35%||Rs. 500 + Service Tax|
|State Bank of Travancore||9.05% to 9.30%||0.30% of loan amount (Minimum of Rs.1000/- and a maximum Rs.3,000/-)|
|Bank of Baroda||8.60% to 10.35%||Rs. 2500 to Rs. 10000|
|Central Bank of India||8.90%||0.50% of loan amount (Minimum Rs. 2000 and Maximum upto Rs 20,000)|
|ICICI Bank Ltd||10.75% to 12.75%(New Car)
|Max. Rs. 6153|
|Union Bank of India||9.90%||No processing charges (offer valid till 31/03/2017)|
|State Bank of India||9.45% – 9.50%||Nil till 31.10.2016|
|United Bank of India||9%||0.50% of the loan amount sanctioned subject to minimum of Rs.500/- and maximum of Rs.10,000/-|
|Dena Bank||11.35% to 11.85%||Rs 500/- irrespective of loan amount|
|Bank of Maharashtra||10.10%||0.25% of the Loan Amount (Min.:Rs.500/-)|
|Corporation Bank||9.15% to 9.90%||0.50% for loan upto Rs. 50 lakhs
1% for loan above Rs. 5 lakhs
(Minimum Rs. 1000)
|IDBI Bank Ltd.||9.95%||N.A|
|Oriental Bank of Commerce||9.10% to 11.60%||Upto Rs. 8050|
|Uco Bank||9.85% – 13.60%||1% of the loan amount maximum Rs.1500/-.|
Car Loan Eligibility and Documentation
Before finally applying for the car loan, it is necessary that you make sure that you are eligible to apply for a car loan in a particular bank and you have the complete set of all the documents which are required.
Eligibility depends on the age, annual salary, capability to repay the loan etc.
Most of the banks need documents like application form, age proof, salary proof, income proof, identity proof, residential proof etc.