It is a loan that requires the customer to pay for the vehicle by annual payments rather than a one-time charge. The seller needs to pay half of the premium as a down payment, while the lender can cover the remainder.
Benefits of a car loan
- Made it easier to purchase a car: – When many banks offer up to 100 percent of ex-showroom financing, you don't have to wait long to buy your dream car.
- Flexibility to pick tenure:- Banks offer auto loans for a period of up to 7 years. You have the freedom to pick your tenure depending on your convenience.
- Loan on the purchase of a used vehicle:- Many banks like Yes bank offer Yes Bank Car Loan is providing loans on a used car these days. While the interest rate on a new car loan will be higher than the interest rate, the loan-to-value (LTV) ratio will be lower than the loan on a new car.
- The interest rate will be negotiated:- Unlike mortgage loans in the case of a car loan, you have the flexibility to settle the interest rate with the lender if you have a strong credit score and a good relationship with the bank.
- No collateral needed:-You do not have to position any collateral to take advantage of the car loan as the vehicle would serve for the bank as a safeguard and if you do not make the deposit, the bank has the power to seize the vehicle and auction it to reclaim the funds.
- The flexibility of payment mode:-You can choose to pay by post-dated checks or use the auto-debit service where you can immediately subtract the equated monthly increments (EMIs) from your bank account.
- Flexibility to pick a fixed or floating interest rate option:- You can choose the type of interest rate that is stable or floating. The interest rate will depend on the type of interest rate you select.
- Savings Outlook:-You could be tempted to buy a used car merely to avoid taking out a loan. But this is not necessarily the most cost-effective alternative in the long term. Used vehicles tend to break down more frequently, often causing expensive maintenance. When you finance a new vehicle, you get the peace of mind that you won't have to pay for such repairs for a long time. Not to mention, many newer vehicles are more fuel-friendly, which means that you pay less for a gas pump.
- Improved budgeting:-When you make a deal on your car loan, you get to determine how much money you spend per month. This ensures that you're not going to be overspending or have to make changes somewhere in your life. With a decent car loan, you might also have enough funds left to start saving for your next new car.
What is a car refinance loan?
Car Refinance Loan is a guaranteed loan where you promise your car's documentation to the lender to get cash. Much as personal loans, there are no limits on the end-use of funds in the case of a vehicle refinancing loan. Although processing costs are comparatively smaller, the cost of the loan is usually up to 60-805 of the total value of the vehicle. Often the paperwork is going to be lengthy.
Documents needed to take a car loan
- When applying for your car loan, you may require the following papers.
- Properly completed application form.
- Photographs.
- Know the customer papers, any evidence of identity (voter ID, visa, ration card), and any proof of address (electricity bill, phone bill, passport).
- Evidence of income-latest salary slip.
- At times, banks can also seek evidence of work security.
Factors that influence the interest rate of your car loan
- It'll focus on your credit score. If you have a high credit score, you can negotiate with your lender for a lower interest rate.
- Not only will the tenure of the auto loan determine the overall interest outflow, but also the interest rate. Generally, banks charge a higher interest rate on shorter-term loans and a lower interest rate on long-term loans.
- Car age and model will also be one of the considerations taken into account when determining the interest rate of the car loan.
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