• Zero-Down Payment Car Loan

    A car loan where the borrower does not need to make any down payment is known as a zero down payment car loan. In such loans, the bank or the lending institution offers to fund the entire value of the car and hence, these loans are sometimes also referred to as ‘100% Finance’.

    How Does Down Payment Affect the Total Cost of a Car Loan?

    Down payment is the initial payment made towards the purchase of any expensive article, which, in this case, is a car. It is typically set as a certain percentage of the car’s value while the balance can be paid by taking a car loan. Down payments are required by the seller usually to validate your financial credibility which will give them some assurance. Paying a substantial amount as a down payment reduces the amount of loan that you need to avail and, in turn, lower the interest rates and the EMI (Equated Monthly Instalment) amount. A large down payment will increase your chances of securing a loan and also allow you to repay it in a shorter time.

    However, what happens if you are unable to or do not wish to make a down payment towards the purchase of a car? This is where zero down payment car loans can come in handy.

    Features of Zero Down Payment Car Loans

    • Accessories of the car will not be covered under the zero down payment car loans.
    • To avail zero down payment car loans, a good credit track record is mandatory.
    • Borrowers may have to pay loan the processing fees to the lender while availing the zero down payment car loans.
    • To avail a zero down payment car loan, you should make sure that the amount of car loan should not exceed your net yearly income.

    Top Lenders Offering Zero Down Payment Car Loans

    HDFC Bank Car Loan– Private sector lender HDFC Bank offers up to 100% funding with its car loans. Existing customers of HDFC Bank have higher chances of approval for the zero down payment car loans. The process will also require minimal paperwork and the loan will be approved and disbursed quickly. Borrowers may have to pay a small percentage of the loan amount as processing fee. The processing fee may vary depending on road tax, state registration, and insurance.

    ICICI Bank Car Loan – Zero down payment or 100% finance is available under car loans offered by ICICI Bank. The car loan comes with a repayment tenure of up to 7 years, affordable interest rates, instant approvals, and quick processing. Foreclosure and pre-payment facilities are available on the ICICI Bank car loan.

    Axis Bank Car Loan – 100% funding on the car’s ‘On-Road’ Price is offered by Axis Bank on its car loans. The loan amount starts from Rs.1 lakh and comes with affordable interest rates starting from 9.25% onwards. The bank also offers the longest repayment tenures of up to 8 years on its car loans. The car loans offered by Axis Bank allows part-prepayment and foreclosure with applicable charges.

    Car Loan Eligibility Criteria for 100% On-Road Finance

    • The applicant must be 25 years or above.
    • He or she must have a CIBIL score of 800 or above with no negative loan repayment history in the credit report.
    • The applicant must have a minimum annual income of Rs.3 lakh. The car loan amount will not be more than the applicant's net annual income. Existing loan EMIs plus the proposed loan EMI must be less than 50% of the applicant's salary.
    • He or she must be a salaried employee or a self-employed person with minimum 3 years of work experience.
    • The applicant's bank balance must be minimum 3 times the proposed loan EMI.
    • No cheque return history in the last 6 months in the applicant's salary account or business current account.
    • The applicant should be residing at the provided address for minimum 2 years.

    You can check online to see if a zero down payment car loan can be availed. Focus on improving your credit score by making regular EMI payments and credit card bill payments on time. Another method of improving your credit score is by balancing secured and unsecured loans.

    Documents Required for availing Zero Down Payment Car Loans

    Here is a list of documents that an applicant must furnish along with a duly-filled and signed car loan application form:

    • For income proof, you can submit the company ID, salary credit in bank statement, Form 16 (in the case of a salaried employee) and VAT or ST registration with current account statement (for a self-employed individual).
    • For address proof, you can submit the homeownership deed.
    • For identity proof and age proof, you can submit PAN card, Passport, Aadhaar card, and recent passport-sized photographs.
    • Previous loan or vehicle ownership documents like RC of the old car and loan agreement.

    Income proof for a salaried employee can include last 2 years’ Form 16, last 3 months' payslips, and last 6 months' salary account bank statement. Income proof for a self-employed individual can include the last 2 years' ITR, last 6 months' current account statement, Sales Tax certificate, Service Tax certificate, and VAT certificate.

    FAQs

    1. Should I pay the processing fee in the case of a zero down payment car loan?
    2. Yes, you must pay the processing fee in the case of a zero down payment car loan.

    3. What are the different factors that determine the price of the car?
    4. The different factors that determine the price of the vehicle are mentioned below:

      • Insurance
      • Road tax
      • State registration
    5. What are the different factors that banks consider when providing a zero down payment car loan?
    6. The different factors that are considered by banks when they provide a zero down payment car loan are mentioned below:

      • Your relationship with the lender
      • Car’s value
      • Pending loans
      • Payment history
      • The number of years you have worked
      • Income
    7. What are the different documents that must be provided when I avail a zero down payment car loan?
    8. The different documents that must be provided when you avail a car loan are mentioned below:

      • Car documents
      • Proof of address
      • Proof of identity
    9. Are accessories covered under the loan?
    10. Usually, accessories are not covered under the loan.

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