Are you planning to buy a new car on finance? Know all about EMIs and car loans, interest rates negotiation, documents required and eligibility criteria.
If you are planning to purchase a brand-new car on finance then this article is for you. In this article, we will be covering vital scenarios to keep in mind before applying for a car loan.
A person should always do a good research on the interest rates offered by banks while buying a car on finance as a good research can help in saving money. So, the first thing is the interest rate which mainly depends on the car type and the time that will be taken for the repayment of the car loan. The loan can be sanctioned at low-interest rates from banks if an individual is an existing customer of the bank.
Now comes the down payment part. So once you have decided which bank is ideal for you to take the loan, keeping the interest rate aspect in mind, it’s time to keep some amount ready for the down payment. If no down payment is given, there are chances that the rate of interest on the loan will be higher. It’s always an individual’s decision to decide how much of the down payment they are willing to pay, but it is always recommended to pay a higher amount of down payment as it will help in reducing the EMI of the loan and save big in the long run.
Please visit https://carjasoos.com/emi-calculator to know the estimated figures.
Always keep a fantastic credit history to secure car loans at competitive prices. A third-party guarantee which could be a friend or relative is crucial for you to obtain that car loan. If a person has a fantastic credit history then the third-party guarantee is not required. The past credit behavior will depict the creditworthiness of a car loan applicant. So, it’s always advisable to check your CIBIL score before applying for a car loan. It’s also always good to utilize one’s negotiation abilities when procuring a car loan because interest rates aren’t set in stone (aren’t fixed) good negotiating capability can surely assist you in receiving car loans at competitive rates of interest.
What are the types of Equated Monthly Installments (EMIs) in India?
1. Regular EMI
Under this process, the rates of interest are fixed as well as the Equated Monthly Installments are readily calculated for the whole repayment tenure. Installments could be compensated at the start of the month called advance payments or at the month-end which is called arrears.
2. Step Up EMI
With a step-up EMI, the equated monthly payments slowly rise together with time. The quantum EMI comprising this principle and the interest amount rises. The interest is greater than that of their regular EMI’s. This helps to keep the EMI’s in a lower level for the first few years that quickly rises with the passing of time hence enabling one to eliminate his/her car loan amounts fast.
3. Step Down EMI
The EMI’s are inclined to be greater in the start and slowly decrease with time. This helps to keep a greater loan load initially which slowly reduces over time. The rates of interest are greater than in the case of regular installments but as soon as the loan is paid off, the principal amount goes down instantly, and it will have a lesser repayment period compared to the regular EMI. This results in saving the cost on such a car loan.
4. Balloon EMI/Balloon Payment Mortgage
Under this process, a lump sum of around 20% of the principal amount could be paid at the end of this repayment tenure. The obligations at the end of the loan calculators are high. The interest rates charged are greater, but you can avail of a lesser EMI burden in the first few years.
5. Special Tie Up
Under this process, the financer has a tie-up with the bank institutions where the client has his accounts. This is quite handy for the consumer. Whenever there is surplus money in the client’s account this may be used to repay the car loan as an advance payment. These payments decrease the EMI tenure dramatically or may lessen the amounts of their EMIs. This aids in getting rid of the car loan immediately.
What are the documents required and eligibility criterias to avail a car loan?
- A minimum age of 21 years is needed for an individual to avail of a car loan in India at the time of use of this loan, and up to 58-60 years old at the time of maturity of this loan.
- To avail a car loan in India, one needs to make Rs 1.0 lakh to Rs 2.5 lakh per annum and this largely depends on the bank institution he plans to take the car loan from. The typical quantum of loan sanctioned is around 3-6 times of the yearly income.
- Both salaried as well as self-employed individuals can provide income tax documents as proof of income. Recent salary slips which are attached to Form 16 can also be given as income proof. For identity proof, documents such as passport, driver’s license, pan card, voter ID card should be provided and for address proof telephone or electricity bills will work.
- Bank statement updated for the last six months needs to be presented.
- The applicant should be working for at least 2 years and must have served the current employer for a minimum at least a year. Certain banks state that one must have continuous employment of at least 2 years with the current employer.
- The normal period for repayment of the car loan is 5-7 Years using a processing fee which ranges from Rs 1500-2500 to get finance of Rs 3 lakhs – Rs 8 lakhs and to get a loan of Rs 10 lakhs, processing fees would be around Rs 5000. The processing fee is often as large as Rs 10000 for loan funding of cars over 10 lakhs.
- The loan allowance to get a brand-new car is 15% and to get an old/used car is 25%. This way on a new car of Rs 5 Lakhs, the applicant must pay 15% of the expense of the new car which comes to Rs 75000 (approx.) known as the down payment and the rest of the Rs 4.25 Lakhs will be covered by the bank as a part of loan.
- For business owners, the minimum amount that they need to earn can be around Rs 6-10 Lakh annually and the person should have been doing business for at least 3 years. There needs to be a landline connection at the workplace or residence. Business turnover should be at least Rs 5 Lakh annually, they may also need to present audited balance sheet and P&L account updated for two years which shows the income proof for self-employment.
Cars are just not a vehicle for most of us, it’s a passion and for some people, it’s a necessity. But in both cases, it’s the next biggest investment after investing in a home. We understand that car buying requires lots of effort which needs good research to find your car on the best budget. With keeping all the other efforts aside, choosing the right financing option is very important. One always needs to be careful while choosing a correct financing partner and being aware of the terms and conditions. We hope this article will help you in your research and yet you won’t make any wrong decision in financing your car.