Car loans make it much easier to get that dream car, whether you need it for work or just for fun. Car loans let you get the car you want right away and pay for it in easy installments. This is better than having to pay a large amount of money altogether, which might also take several years to save. Let’s look at the different kinds of car loans you can get:
- New Car Loans: These are loans for cars that are brand new and have just come out of the factory. The owner of a new car can feel more at ease because service, spare parts, and warranties backed by the brand are all easy to get.
- Used Car Loans: This is a loan for a used car from a dealer or a private person. Used/pre-owned cars usually cost too less compared to when they were new, and for the same price, they often have more high-end features and better performance than new cars.
- Loan Against Car: These loans, which are also called “refinancing,” can help you lower your per-month payments by giving you a new loan with a lower interest rate or by extending the time you have to pay back your old loan.
New Car Loan vs Used Car Loan
Apart from the apparent difference in what kind of car you can purchase with each loan, there are some other important differences between the two that you should think about before making your choice.
- Loan Amount: Banks and other lenders will always lend more money for a new car than for an old one. If you meet all the requirements, you can get a 100% loan on a new car, but you can only get a 90% loan on a used car.
- Loan Duration: New car loans can be paid off over a longer period of time than loans for used cars. Some banks give up to seven years to pay back a loan for a new car, but most only give five years to pay back a loan for a used car.
- Interest Rates: Banks and other lenders usually offer low interest rates on brand new cars because they come with warranties and are less likely to break down. Used cars have higher interest rates than new cars because they may not be covered by a warranty and can have more problems and need more repairs.
Car Loan From Popular Indian Banks
If you want to get a car loan, you should look around for the lender who will give you the appropriate amount of money at the lowest rate of interest. Here are the rates that State Bank of India (SBI), HDFC Bank, ICICI Bank, and Bank of Baroda charge for car loans.
- State Bank of India (SBI)
The SBI website says that you must be between 21 and 67 years old to get an SBI Car Loan. For regular employees, the most that can be approved is 48 times their Net Monthly Income. According to the SBI website, the minimum net annual income of the applicant and any co-applicants (if any) should be at least Rs 3,00,000.For professionals, self-employed people, and business owners, the most they can get is 4 times their Net Profit or Gross Taxable Income as shown on their ITR, after depreciation and paying off any other loans. For people who work in agriculture and related fields, the most they can get is three times their Net Annual Income.
- HDFC Bank
Within six months of getting the HDFC Bank Car loan, customers can’t have it taken away. According to the HDFC Bank website, if the loan is paid off early within a year of the 7th EMI, the bank will charge 6% of the amount still owed on the loan. For prepayments made between 13 and 24 months after the first EMI, the fee is 5% of the outstanding principal. For prepayments made after 24 months from the first EMI, the fee is 3% of the outstanding principal.
- ICICI Bank
ICICI Bank offers new car loans with fixed interest rates. A fixed interest rate means that the interest rate on a car loan will stay the same over the life of the loan. Depending on the length of the loan and other factors, the interest rate can be anywhere from 7.50% to 9%. According to the ICICI bank website, the interest rates on new cars depend on things like the type of car, the customer’s relationship with the bank, the length of the loan, and so on.
- Bank of Baroda
On its website, Bank of Baroda says that it will finance up to 90% of a project. The rate of interest ranges from 7% to 9.75%. Customers who don’t buy credit insurance will have to pay a risk premium of 0.07 percent, which is what the rules are now.
Car Loan Eligibility
Your ability to get a car loan is based on how much money you make now, how much the car is worth, and how much you can pay back based on your current expenses. Different banks may have different loan amounts and interest rates. Most of the time, banks and other financial institutions will lend up to 85% of the car’s on-road price. Some lenders say they will lend up to the full cost of the car.
Car Loan EMI & Processing Fee
When you get a car loan, it’s important to choose monthly payments (called “equated monthly instalments,” or “EMIs”) that you can afford. Do not choose a lower monthly payment (EMI) and a longer loan term just because you can; do so only if you can afford it. This is because an unnecessarily high amount of interest will be paid if the EMI is lower and the loan term is longer. No matter how much you borrow, make sure your monthly instalments are manageable and don’t put too much stress on your finances. On the other hand, you shouldn’t choose higher EMIs if it means giving up your monthly savings for important financial goals.
No matter how much you borrow, you should first make sure that your EMIs are easy to pay and won’t hurt your finances. Most loan companies offer terms for new car loans that range from 1 to 7 years. You can choose the loan term that works best for your situation. Many banks charge a processing fee when you ask for a car loan. Before you decide on a loan, you should look at the processing fees. During the holiday season, some banks offer to waive processing fees or even lower the rates they already have.