Unraveling the mystery of car loans

Indiandrives details about the various nitty gritty’s of how to get a car loan.

Purchasing a car is not a small investment that we make in our lifetimes, and in many a instances, a multiple of times. With the opening up of the Indian economy in the early nineties which brought about the globalized era, financing a car is not such a nightmare which it was once upon a time. The relative ease with which we can avail loan for the automobiles, have made the financing of vehicles through banks an everyday phenomenon. With all said and done for seasoned players, applying for a loan by a first timer can prove to be an intimidating experience. Follow us till the end to find out how you can simplify this financial riddle.

Advances for the purpose of purchasing a car is generally studied on the basis of the individual’s income, the repayment mode, model of the vehicle and in other cases a track record vis-à-vis other creditors. In ideal circumstances this translates into approximately 2.5 to 3 times of the annual disclosed income of a salaried professional or in case of self-employed can go up to 6 times. Usually banks give advances to the tune of 90 percent of the ex-showroom prices of the vehicle. If your income is falling short in order to get you the desired amount of loan,  the income of your close relative or your spouse can be clubbed. In such instances the relative or the spouse is treated as co-applicant.

Most banks charge a penalizing amount in the event you try to repay the liable amount before the prescribed time limit agreed upon during the time of the application. Ideally, search for a bank that has the least penal charges, who knows when lady luck will smile on you? Certain banks even go an extent of making an upper ceiling for early payment of loans. Look out for these clauses in the bank loan you are mulling to finalize upon.

The total cost of your loan does not mean only the advances towards your purchase. You may not ascertain the real cost of your loan unless you have taken into account all the charges that have been levied under various heads. Examples of these include pre-payment fees, processing fees etc. Below we have given you a list of charges that may be levied on you by the banker.

  • Processing fees
  • Late payment charges
  • Documentation charges
  • Cheque bounce charge

Ideally for a car loan you require a trinity of documents- income proof, residence proof and your identity proof. Identity proof could be any of your licenses, PAN card, Voter’s Id card, Passport etc. as for residence proof, accepted documents include Voter ID card, Ration card, Driver’s license or your Passport (provided your residing place is the same in all these documents). If the address that you reside at is different than the one on any of your residence proof documents aforementioned, you need to produce as residence proof, a telephone land-line bill or an electricity bill. For salaried people the salary slip will act as a statement of income. Self employed people need to produce  the income tax returns file for the previous 2 years as a proof of income.

Before you zoom in to your dream car there are a few more formalities that you need to do to finish this process. Chief amongst them is signing the power of attorney, which will enable the dealer to go to the Regional Transport Office (RTO) and register the vehicle under your name.

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