Things to look for while availing a car loan
A vehicle loan is a type of personal loan that is specifically designed for the purpose of financing the purchase of a vehicle. The loan amount is usually based on the cost of the vehicle, and the lender will hold a lien on the car until the loan is fully repaid. This means that if you default on the loan, the lender has the right to seize the vehicle and sell it to recover their losses.
How an Instant Car Loan Works
Car loans are typically offered by banks and other financial institutions. When you apply for a vehicle loan, you will need to provide the lender with information about your credit history, income, and other financial information. Based on this information, the lender will determine the interest rate and loan terms they are willing to offer you.
Once your loan application is approved, you will need to provide the lender with a copy of the purchase agreement(quotation) for the vehicle you are purchasing. The lender will then disburse the loan funds to the dealer.
The interest rate on your car loan will be determined by a variety of factors, including your credit score, the loan term, and the loan amount. The interest rate can be fixed or floating, and the loan tenure can range from a few months to years.(subject to bank’s policies.)
Benefits of a Car Loan
There are several benefits to financing your car purchase with a loan, including:
Affordability: An instant car loan can help make a large purchase more affordable by spreading the cost of the vehicle over several years. One can opt for loans of up to ₹75 lakhs, usually covering 75% – 100% of the vehicle’s on-road price*.(*this amount is subject to eligibility of the applicant and the lending policies of the financial institutions)
Flexibility: Car loans offer a flexible tenures and interest rates, so you can choose the option that works best for your budget and financial goals.
Improved Credit Score: Making regular repayments on a car loan can help improve your credit score, which can be useful when you apply for other types of loans or credit in the future.
No Upfront Cost: With a car loan, you can avoid the large upfront cost of paying for a vehicle in full. Instead, you can make monthly repayments over the life of the loan. Banks offering an instant car loan can offer repayment tenure options ranging from 1 to 7 years.
What to Consider Before Applying for a Car Loan
Before you apply for an instant car loan, there are several important factors to consider:
Loan Amount: The loan amount sanctioned will depend on several factors, including your credit score, income, and the value of the vehicle you are purchasing. Make sure to consider the loan amount carefully, as you don’t want to borrow more than you can comfortably afford to repay.
Interest Rate: The interest rate on your car loan will impact the overall cost of the loan. The rate of interest is directly linked to the base rate(MCLR) as per RBI directives. Generally, banks like Karnataka Bank offer competitive interest rates with easy approval and quick sanctions for car loans.
Loan Term: The loan tenure you choose will determine how long you have to repay the loan, as well as your EMI amount.Consider your financial situation carefully when choosing a loan tenure, as you want to make sure you can afford the monthly repayments.
Pre-Payment Penalty: Some car loans come with a pre-payment penalty, which refers to the fee you pay on the remaining loan amount if you pay off the loan early.That’s why it’s important for you to check if the bank you’re taking a loan from charges such a penalty or not.
In conclusion, an instant car loan is a great option for individuals who are looking to purchase a vehicle but may not have the funds readily available. By evaluating multiple lenders, interest rates, and the convenience of the process, individuals can make an informed decision and find the best car loan option for their needs. Additionally, it is important to have a clear budget in place and consider all associated costs to ensure that the car loan is affordable and sustainable in the long term to make timely repayments.