Car Loan

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Car Loan

What is a car loan?

The car loan is a type of the loan in which you borrow an amount for some specific period time from the lenders for buying a car and Landers charge some interest rate on the borrowed amount. Nowadays almost all middle-class families have a car and if not, then they are thinking of taking it, but there was a time when buying a car was not possible for the middle-class family. Ever since the bank has started to provide a car loan, it has become easier for people to afford a car. Just because of the car loans now people do not have to think much before taking a car, they can simply avail a loan and buy a car. The car loan is also known as “auto loan”.

Types of car loan:-

There are mainly three types of car loan:

  • New car loan
  • Used car loan
  • Loan against car

New car loan:-

The new car loan is used for purchasing a new car. If you are thinking of getting a new car, but the savings you did to buy a new car is not enough, then you should go for this loan. This loan will help you to fill the gap between your saving and a dream of having a brand new car.

Used car loan:-

This loan is used for purchasing a used car. Most of the banks offer 85% of the car value as a loan. However, the interest rate on the used car loan is higher in comparison to the new car loan. Your car should be less than 10 years old when your loan matures.

Loan against the car:-

This loan is very useful when you need a loan quickly for the car, the only condition is that you must have a car that you can pledge. To avail a car loan you should have at least 750 credit score or above. The tenure ranges 1 to 3 years for this.

Eligibility for availing a car loan:-

every bank has its own different-different eligibility criteria for the car loan. there are some common eligibility criteria which you should qualify to avail a car loan.

  • you should be at least 18 years old or less than 60 years old
  • your salary should be at least 10,000
  • if you are self-employed then age should be between 18 to 65 years old
  • you should have Indian nationality

Documents required for availing a car loan:-

here are some common documents requirements which are asked by every bank.

  • Age proof:- Aadhar card/ PAN card/ Voter card/ Birth certificate (anyone)
  • Identity proof:- Aadhar card/ PAN card/ Voter Id card/ Driving licence, etc (anyone)
  • Address proof:- Utility bill/ PAN card/ Driving licence/ Aadhar card, etc (anyone)
  • Passport size two photographs
  • Income proof
  • Bank statement

How to apply for a car loan:-

There are commonly two ways to apply for a car loan:

  • Online
  • Offline

How to apply online for a car loan:-

  • Go to the or bank website by which you want to avail a loan
  • Fill the application form with all the information asked in the form
  • Submit the form with the required document
  • Once you have submitted the form with the documents our agent will contact you
  • After verifying your document you will be sanctioned for the loan

How to apply offline for a car loan:-

  • Go to the and compare the loan interest rate and offers of the different banks
  • After comparing and deciding the right bank go to the bank branch which has chosen for availing a loan
  • Fill the form with the all required information
  • Submit the form to the bank with the all required documents
  • Once your document is verified by the bank and if you meet all the eligibility criteria of the bank you will be sanctioned for the loan.

New car loan interest rates comparison:-

Bank Name Interest Rate
Axis Bank 11.20%
SBI Bank 11.2%
Bank Of India 9.0%
HDFC Bank 10.26%
ICICI Bank 10.6%
Punjab National Bank(PNB) 9.5%
Yes Bank 12.20%
Bank Of Baroda 10.7%
IDBI Bank 9.80%
RBL 12%
Federal Bank 9.5%

Used car loan interest rate comparison:-

Bank Name Interest Rate
Axis Bank 16.80%
SBI Bank 12.60%
Bank Of India 9.55%
HDFC Bank 13.0%
ICICI Bank 12.84%
Punjab National Bank(PNB) 11.20%
Yes Bank 14.0%
Bank Of Baroda 10.45%
IDBI Bank 10.01%
RBL 15.0%
Federal Bank 11.15%

Advantage of a car loan:-

  • By taking a loan for purchasing a car saves your saving you don’t have to burn all your saving to purchase a single car, so by taking a loan it gets easy to buy a car.
  • You have the flexibility to choose a tenure according to your convenience. Generally, banks offer tenure up to 7 years.
  • If you cannot afford a new car and you have decided to get a used car but still there is a need of some money for it, you can take a car loan. There is a lot of lenders who offer a car loan on a used car.
  • If you have a good credit score you can bargain for the interest rate. The lenders may give you a lower interest rate if you have a good relationship with the bank.
  • In this loan, you don’t have put any collateral for availing a loan, but your vehicle work as collateral. If you didn’t pay back the borrowed amount then the bank has the right to sell it and recover the amount.
  • In the car loan, there is a facility to choose a payment mode. you can pay by EMI with the auto-debit facility in which the monthly instalment will be automatically debited from your bank account or post-dated cheque.
  • There is a facility for choosing a floating interest rate or floating interest rate. You can choose the type of interest rate according to your convenience. The interest will depend on the type of interest rate which is chosen by you.
  • The car you buy by taking a car loan is considered like collateral itself, if you are unable to return the borrowed amount, then the bank takes it back. The bank cannot touch your assets other than your car.

Features of car loan:-

  • If you want to get a used car, then you can take a used car loan.
  • banks always provide a fixed rate for the car loan, which helps the borrower to pay them back the borrowed amount.
  • Car loan helps people to get a better car than their budget.
  • The car loan approval process is quick if your all documents are correct then you will get approved instantly.
  • The car loan is easy to get in comparison to other loans in India. It has quick and easy documentation process.
  • The banks usually provide the borrower a flexible tenure option by which they can choose their tenure according to their convenience.
  • Most of the lenders offer an interest rate depends on the borrower credit score, so if your credit score is good then there is a good chance of getting a low-interest rate on the car loan.

Some important tips about car loan:-

Down payment:-

Whenever you take a loan, try to make a down payment because if you make a down payment, then later your EMI  of the loan will be reduced, and you will have to pay less.

Tenure of the loan:-  

Always compare the loan tenure because the longer the tenure, the more time you will have to pay the EMI, so always choose loan according to your comfort.

EMI of the loan:- 

Always try to keep the EMI of your loan higher, the more your EMI, the sooner your loan will be finished.

The interest rate of the loan:-

Never forget to compare the interest rate before taking a loan. Always apply for a loan from the right bank only after comparing the interest rate.

Approach an existing bank:-

Always try to take a loan from the bank in which you already have an account. Taking a loan from a bank where you already have an account is quite easy and saves you time as you do not have to provide your basic information because the bank already has it.

Maintain the credit score:-

The first thing checked by banks or any other lender is your credit score so always try to maintain your credit score above 750. When your credit score is good the chance of getting sanctioned for the loan increases.

Benefits of SBI car loan:-

The SBI car loan is best for the professionals and agriculturist with no income proof.

  • The best thing in SBI car loan is that the interest rate is calculated on a daily basis reduced amount.
  • SBI offers you tenure up to 7 years.
  • The loan amount depends on the car’s on-road price.
  • There is no need of income proof for professionals or agriculturist.
  • SBI offers up to 90% of the car’s on-road price as a loan.

Benefits of Axis bank car loan:-

The Axis bank car loans are specially for those doesn’t need a big amount for buying a car.

  • You can take a loan minimum of Rs 1 lakh.
  • Axis bank offers tenure up to 8 years.
  • Offers loan amount up to 100% on-road price of the car.
  • If you have pre-approved then there is a no need of bank statement or income proof for availing a car loan.

Benefits of PNB car loan:-

  • PNB offers tenure up to 7 years.
  • Interest rate starts from 8.7% and if you have an already account in PNB then the bank will offer you special interest rate.
  • There are no pre-payment charges.

Benefits of HDFC car loan:-

If you want to get a luxury car then you should proceed towards the HDFC car loan.

  • Funding for comprehensive insurance
  • you get 100% on-road price of the car as a loan
  • HDFC provides car loan up to 3 crore
  • Tenure ranges from 12 to 84 months.

Benefits of ICICI car loan:-

  • The interest rate ranges between 9.3% to 12.8%. However, the interest rates depend on the tenure of the loan.
  • The highest quantity of credit is dependent on the applicant’s history, price of the car, version of the model, etc.
  • This loan can finance the full on-road cost of the vehicle.

Benefits of federal bank car loan:-

The federal bank car loan offers you free personal accident insurance.

  • The federal bank offers tenure up to 84 months.
  • Free personal accident insurance offers up to Rs 10 lakh.
  • There is no requirement of income proof.

Benefits bank of India car loan:-

  • Bank of India offers tenure up to 7 years.
  • Interest rate starts from 9.5%.
  • Bank of India doesn’t have any hidden charges or fee.

How to avoid rejection for the car loan:-

Credit score:-

Before applying for a loan you should check your credit score because the credit score is the first criteria which checked by any lender. If you don’t have good credit score then first improve your credit score then apply for a loan.

Prepare Documents:-

To avoid the rejection of the loan always prepared the document which is required applying for loan. Your chance of being rejected for the loan will reduce if you will prepare the documents before applying. Usually, banks offer you up to 80% of the car’s on-road value rest of the value you have to pay so keep the money ready before you apply.

Check repayment capacity:-

Always take as much loan amount as you can payback. Applying for the loan amount that you can not afford can reduce the chance of getting approved for the loan.

Credit history:-

Always try to maintain the credit history, because the credit history defines that you paid the last loan EMI on time or not and other things. By checking your credit history lenders find out whether you have paid all the loans on time or not and how was your behaviour in that duration.

Make all loan payment on time:-

Whenever you take a loan, always pay it on time because not paying on time can spoil your credit history and in case of bad history the chances of rejections increase.

Apply at your existing bank:-

If you apply for a loan from the same bank in which you already have an account, your chances of getting approved for the loan will be increased. When you apply for a loan in an existing Bank, they already have your information, so you do not have to bother much for the loan.

Low-interest rate car loan or car finance:-

Bank Name Interest Rate Tenure
SBI 8.7% 7 years
ICICI car loan 8.75% 7 years
PNB bank 8.80% 7 years
Bank of Baroda 8.95% 7 years
Federal bank 9.10% 7 years
Axis bank 9.20% 8 years
IDBI bank 9.30% 7 years
Bank of India 9.5% 7 years
IndusInd bank 10.50% 5 years
Kotak bank 11.51% 5 years


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