AUTO LOAN
What is Auto Loan ?
A car loan is a EMI based loan which is used for purchase of a new car or for purchase or a used car.
Tenure of a car loan can go up to 7 Years and depends on the on-road price of the car bought and the repayment capacity of the borrower.
The on-road price of the car includes the ex-showroom price of the car, registration cost, insurance cost and extended warranty in some cases depending on the financial institution from where the loan has been applied for.
Financial Institutions generally extend car loan facility up to 90% of the on-road price of the vehicle being purchased. Any individual between age of 21 years till 60 years can apply for a Car Loan.
The car which is being purchased remains hypothecated in the name of the bank or financial institution which extends the loan facility till the end of the tenure of the loan.
Financial institutions generally charge processing fees up to 1% of loan amount + applicable GST
Pre payment charges for PSU banks are generally Nil while Private Financial Institutions have a waiting period of 36 Months for pre payment charges to be Nil.
Financial Institutions also fund on pre owned cars or used cars but usually Rate of Interest is High and LTV is generally low. Processing Fees generally depends on the pre owned car for the which the loan has been applied for along with the financial institution from where the loan has been applied for.
Financial institutions also provide Top Up on the car loans availed by the customer which can be provided post completion of repayment of 12 Month EMIs.
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TYPES OF AUTO LOAN
Auto Loan can be availed as a Term Loan and there are usually 3 types of Auto Loan:
This loan can be availed for purchase of new car. There are many PSU Banks, Private Sectors Banks and various Financial Institutions which provide such kind of loan. In such cases, the new car is hypothecated in the name of the Bank/Financial Institution from where loan has been availed. Hypothecation ends at the end of the tenure of the loan availed.
This type of loan is vailed when a customer wants to purchase a used car/ pre owned car. The RC gets transferred from the current owner of the the vehicle to the purchaser of the vehicle post disbursement of the loan. The ROI charged by the financial institutions is higher than ROI on new car loan. The LTV on which the loan is calculated basically depends on the current market value of the vehicle being purchased by the applicant.
This is a repayment track based loan. Financial Institutions which provide New Car Loan/Pre owned Car Loan provide top up facility based on successful payment of 12 EMIs of the car loan. These funds can be utilized for short term emergencies, for expansion of business or for working capital requirements. Hypothecation of the vehicle on which the base loan has been given is extended up to the tenure of the top up loan.
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