Currently, the interest rates on car loan from banks range from 8.75% to 13.5%, and if your credit score is high, you could even bargain for the best rate.If you are planning to opt for aCar Loan, this Car Loan EMI calculator will help you estimate how much will be the Equated Monthly Instalment (EMI). Simply provide the Car Loan amount, the loan tenure and the interest rate of your Car Loan.
Who is eligible for a Car Loan?
A salaried individual, self-employed—whether in business or profession—are eligible to apply. One can even apply on the name of the HUF, firm, company, etc. to avail of the depreciation (a deductible expense) benefit, under the Income-tax Act.
Individuals between 18 to 75 years, irrespective whether salaried or self-employed, are eligible, subject to certain conditions.
Salaried individuals preferably should have a total work experience of at least 3 years, while for a self-employed, a minimum of 2 years in the current business or profession. In case of the latter, the stability counts in the due diligence process, while for salaried individuals, the type of employment, who is the employer, carries weight.
Moreover, where you reside i.e. country, urban/semi-urban/rural area, and the number of years you’ve been residing there, type of residence, whether on rent, family-owned, or self-owned, matters.
The bank or the lending institution would look at your monthly income —and the better it is, higher is the amount of Car Loan that you will be eligible for, and greater is the chance of the Car Loan being disbursed soon. Broadly, the monthly income requirement is a minimum of Rs 10,000, subject to the type of vehicle you seek to buy and depending on the lender’s requirement.
The documents needed for a Car Loan disbursement are:
- Income statements
- Bank statements
- Salary slips and Form 16
- Latest Income-Tax Returns
- Credit report
- Age proof (birth certificate, passport, Aadhaar card, voter id, PAN card etc.)
- Address proof (Aadhaar card, passport, electricity bill, telephone bill, ration card, etc.)
- Photo identification proof (Aadhaar card, voter id, PAN card, passport, driving license, etc.)
Lending institutions would closely scrutinise the following documents before deciding on the Car loan amount to be disbursed.Besides, the type of vehicle you wish to buy, the CarLoan tenure (3 years, 5 years, or 7 years), employment stability, and pre-existing EMIs (or Equated Monthly Instalments) on outstanding loans will be looked at closely before approving your CarLoan at a certain EMI.
What are the factors to look at when taking a Car Loan?
Interest rate:When you take a loan, the interest outgo is one of the vital deciding factors. The interest rate you would pay depends on a variety of factors: type of vehicle you wish to buy on loan, your credit worthiness, risk profile, tenure of the Car loan, whether you’re a salaried individual, self-employed, priority banking customer, among other things. The interest outgo would determine your EMI and has a bearing on your budgets and long-term financial wellbeing.
Processing fee & other charges:Availing a Car Loan does not stop with just interest rates; there are processing and other charges levied by lenders. The processing fee is the one-time fee charged as a certain per cent of the loan, but capped at an ‘x’ amount. Some lenders levy a fixed processing fee. A higher processing fee impacts your total cash outflow while availing a loan.
As regards the other charges, they include: prepayment charges (also knownas foreclosure charges), part-payment charges, late payment penal interest, loan cancellation charges / re-booking charges, cheque bounce charges and so on, all of which you should examine carefully.
Loan Tenure:The maximum tenure for a Car Loan is usually between 5 to 7 years. A higher tenure can reduce your EMIs, making repayments comfortable, while opting for a lower tenure (of say 3 year or 5 years) increases your EMI.
Repayment flexibility:Apart from the above pivotal aspects, assess if the lender provides you with the flexibility to repay your Car Loan sooner, and at what cost does this come at. This flexibility can help you prepay the Car Loan ahead of time, as well as provide a relief in distressing times. However, it’s best to adopt financial discipline in order to repay loans on time and maintain your financial health in the pink always.
Customer service:You want to buy your dream car with a smile on your face, don’t you? So, ensure that the customer service at the lender has high standards. This service can even help keep track of your Car Loan, allow you to be in better control of your personal finances. Remember, while lenders will have varying customer service standards, there are some basics of good service that are universal.
Terms & conditions:Make sure you read the terms & condition carefully to make an informed choice. This will avoid issues later and ensure a pleasant, hassle-free experience.
When you take a Car Loan, keep in mind these few vital points:
Know your finances precisely – Follow the much needed discipline to keep your debt-to-income ratio healthy (Ideally, your monthly debt commitment should not exceed 40% of your gross income.) Make sure you aren’t compromising and jeopardising your long-term financial goals and also, do not let this strain your current lifestyle to a great extent.
Have a repayment plan in place – Ascertain the Car Loan repayment schedule and have a repayment plan in place so that you don’t miss any EMI/s and end up paying a penalty.
Ensure you hold adequate insurance – As a bread winner, while you endeavour to do the best for your family, insure yourself optimally. The insurance money can aid the financial security of your family members and pay the outstanding Car Loan.
Keep your family in the loop – When you’re planning to avail a Car Loan, make sure youdiscuss it with your family. Sharing your rationale with them will keep them well-informed and their opinions will help you gain a better perspective. Even it is a surprise, keeping your family in the dark may not be in their best interest.
Buying a car is life milestone. And today, owing a car is no longer a luxury, but a comfort that is within one’s reach with attractive Car Loan facility.Remember, paying upfront in cash could put you under the Income-tax department’s radar, more so after demonetisation. But, paying an upfront amount to the extent of the required down payment is perfectly fine.