Normally, banks only give 85%-90% of the total cost of the vehicle. The rest will need to be provided upfront as a down payment. Always opt for a higher down payment and look to save on total interest costs. When you book the car, you need to pay a booking amount, which can range anywhere between Rs. 3,000 to Rs. 10,000.
Whatever may be your family and financial background, there are a few dreams that you would always nurture – a successful professional career or business, own house and your own car. When it comes to buying a car, most of us would either opt to make an outright purchase from our savings or go for an auto loan, depending on the kind of budgets, we have allocated for this goal. Here is some information which will help you with the process of opting for a car loan. Remember, the decision of making any purchases or any financial obligation that you enter into should be made only after taking full stock of your current financial condition and future plans.
Finance Schemes
You will need to check with different banks and compare the finance schemes available with them. The finance schemes currently available in the market are margin money schemes, advance EMI schemes and deposit payment schemes.
You can also approach the dealer you are interested in buying the car from for financing of the car. Most of the dealers would recommend banks that you can choose to go with and your chances of getting a better bargain on interest rates and discounts are brighter if you go with this option. Also, the dealer will take care of tedious paperwork, which can yield some relief.
Eligibility
Eligibility for a car loan is satisfied if your age is above 21 and if you have an annual income of at least Rs. 1 L per annum. Of course, the amount of loan would also depend on your financial profile, price of the car, model variant etc.
Documents Required
Even though some documents may vary between salaried individuals and self employed professionals, the common documents asked for are:
- Application form with photograph
- Identity & Residence proof
- Latest salary slip
- Form 16
- Bank statements
Down Payment / Booking Amount
Normally, banks only give 85%-90% of the total cost of the vehicle. The rest will need to be provided upfront as a down payment. Always opt for a higher down payment and look to save on total interest costs.
The booking amount is the amount paid to the dealer to book the car you are interested in. This amount can range anywhere between Rs. 3,000 to Rs. 10,000. However, for the new Tata Nano the booking amount is the complete cost of the car. Tata’s partnership with various banks has however enabled attractive options of financing the booking amount, which start from a low of Rs 2,850.
Interest Rates
Interest rates vary from bank to bank and also according to the type of car that you are interested in. The rates range between 10% and 15.5% for new cars and between 11% and 18.5% for used cars.
Other Fees
Other than the interest fees, banks also charge processing and documentation charges. This usually needs to be paid up front. These charges vary from bank to bank. Processing fees range between Rs. 1500 and Rs. 5000. Documentation charges range between Rs. 250 and Rs. 500. Then, there are other charges such as late payment charges, duplicate statement charges etc. which range anywhere between Rs. 150 and Rs. 500. There are also prepayment charges which are levied in case you close the loan before the end of the tenure of the loan.
Repayment Period
Repayment of the loan mostly ranges between 1 year and 6 years for almost all banks. Repayment period depends on the loan amount and the person’s income.
These are the most common things you need to check with the bank that you are taking the loan from. Apart from this here are some tips to get the best deal possible for your loan:
- Make a larger down payment – Always try and make a higher down payment. This reduces the requirement for your loan and you have a smaller debt liability
- Go for popular models – Look for models which are popular because banks usually have special offers for the popular models which can prove to be fruitful to you
- Get a car loan that covers on-road price of the car – Always try and get the on-road price car loan because this would include the registration charges, insurance, road tax and other costs associated with the car purchase thus making it a comprehensive solution
- Compare interest rates and other fees – Compare bank interest rates and other fees to get the best deal.