If you really think about it, it's easier getting a loan for a car than a loan for bus fare!
  • Car Loan BYTES FROM OUR KITCHEN

    How Car Loans Work in India?

    Car loans are among the most sought-after financial products in India since a decade and the trend of availing car loans is increasing by leaps and bounds. A number of financial firms and private sector banks in India have laid their focus on the auto loan sector for generating revenue in the form of interest. The car companies in collaboration with the auto loan providers are rolling out plenty of customised offers to attract the customers for availing car loans at varied interest rates.

    While there are already a number of cars on the market, and many of them are in the queue to get launched soon, buying a car has become a cakewalk. Ranging from budget-friendly cars to luxury cars like sedans, there are a number of options to choose from. Hence, there are a variety of options these days for people who are willing to buy new cars at an affordable price range. There is lower interest for government employees depending on the loan amount and other vital parameters. The rate of interest on the car loans depends on a number of factors which include the loan amount, vehicle type, borrower’s credit record and several others.

    Car Loan Application Process

    The entire process of applying for a car loan has been simplified by the banks for the ease of the borrowers. These days right from applying till loan approval and disbursal everything can be done online without any personal visits to the banks. The entire process of the application works in the following way:

    • Form fill up- In the very first step, the applicants need to fill up an application form of their desired bank with all the vital particulars such as their personal details and other required credentials.
    • Document verification- After the submission of the application, the borrowers are required to upload all the documents mandated by the banks. Since the car is the guarantee in case of a car loan, documents regarding that need to be provided.
    • Loan approval- If the bank finds all the document valid and find the borrower to be capable of paying the loan EMIs on time, they will approve the loan amount within a short duration of 2 days.
    • Loan disbursal- The loan amount is disbursed to the applicant after a certain time. In other words, the banks provide a certain percentage of the amount that the buyer has invested in buying his/her car.

    Types of Car Loans Offered

    • Loan for a new car- As the name suggests, a new car loan is a finance that banks provide to the buyers for the purchase of a new car. Usually, banks provide up to 85% of the total value of the car under this type of car finance. In such type of loans, the buyer can avail the loan amount either before or after purchasing the car, however it is up to the bank’s discretion. The car is hypothecated as security and the user needs to pay the EMIs regularly to pay off the loan amount within specified loan tenure. The banks can repossess the car in case of EMI pay defaults.
    • Loan for a used car- A used car or a pre-owned car as it is called is a car which is already used by one or multiple users for a certain time period. Banks or finance agencies offer loan for such pre-owned cars which are not old more than 3 years. Since cars are depreciating assets and tend to lose their value with every passing year the loan amount for such cars are comparatively low than the loan amount offered for a new car. Banks offer minimum 50% to 80% of the existing market value of the car. In certain cases, banks offer up to 90% of the car value.
    • Loan against a car- This is a special type of car loan where the banks provide a loan to the borrowers against their car to meet their financial requirements. Borrowers who are in need of money benefit from this type of car loan. A customer can avail up to 50-80% of the existing value of the car under this loan. The car is taken as the security in this case and is released after the borrower repays the loan amount within time.

    Factors of Car Loan Approval in India

    Applicant’s CIBIL score- The CIBIL score plays a vital role when it comes to car loan approval in India. CIBIL score is the rating given to an individual customer by the Bureau of CIBIL based on his/her past loan repayment record. If the borrower is found to be consistent in paying the loan EMIs on time, the person is given a high rating. On the contrary, borrowers who were not regular with their EMI payments are offered a low credit score.

    Car loan repayment period- Usually in India the car loan repayment period ranges between 1-7 years. It is up to the comfort of the borrower what repayment tenure he/she wants to pick. The repayment tenure has a significant role to play in deciding the monthly EMIs. If the tenure is higher, the EMIs are low and if the tenure is shorter, the EMIs are naturally more. However, it is preferable that the buyers fix a shorter repayment tenure as they will otherwise have to pay more as interest.

    Age of the car- The age of the vehicle is a very important aspect which the lenders consider while offering a car loan in India. The age of the car is very important to determine the value of the car. Usually, in India, the value of a car starts depreciating the moment it is driven out of the showroom at least by 10%. After that, with every passing year, the value keeps on decreasing. Banks or lenders provide used car loans for pre-owned cars which are not more than 3 years old. This way they ensure that in case of loan defaults they will be able to collect the invested money by repossessing the value without ending into a loss.

    Car Loan Interest Rates

    The interest rate is the most vital decisive factor of a car loan. In other words, the interest rate is the sale bait which is used by the banks and finance agencies to sell their loan products. In this regard, it can safely say that that the car loans at present work in India on the basis of promotion and the level of competition is very intense and high. For example, if one bank offers car loans starting from 8.99% p.a. other banks challenge it by offering loans at 8.50% p.a. or even lesser. On an average, the top leading banks and other financial agencies in India are offering car loans at an interest rate ranging from 10% p.a. to 13% p.a. However, the interest rate is not same for all the borrowers and it varies from case to case. Depending on the borrower's profile, applied loan amount, repayment tenure and certain other factors a final interest rate is offered by the banks to the borrowers.

    With the ever-rising fuel prices and the high-interest rates, a borrower needs to carefully analyse all the available car loan products from various banks and agencies before making the final purchase call. While analysing how interest rates work in India, the buyers are streamlined by the experts according to their income levels. While around 6% interest rate is suitable for salaried individuals within the age group of 21 to 60 years, the interest rate of up to 8% is good enough for self-employed individuals. To get the best out of a car loan, first finalise the car model that you want to buy, then the amount of down payment and then decide the interest rates.

    The interest rate offered by the banks are negotiable in certain cases. Borrowers can bring down the rate on the basis of their eligibility factors. Hence, a buyer should shop around and discuss with at least 3-4 banks to get the best loan rate. Before starting the discussion, do your research on the car loan interest rate trends and other facts to have an upper hand in the discussion. Though, the car loan interest rates have started dipping as car manufacturers these days are providing subsidised car loans at lower interest rates, be wise and try all means to get hold of the best offer that the car loan market in India has in store.

    Customer Reviews

    • Central Bank of India Car Loan
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      It was a good experience i had with this loan and the loan amount which they had provided has been sufficient. The interest rate with them is quite nominal when compared with the market rate. There has not been any sort of additional charges which they had made so far.
      Was this review helpful? 0
      , bangalore
      Reviewed on Jan 13, 2019
    • SBI Car Loan
      "Excellent"
      0.5 5.0/5 "Blown Away!"
      I took my car loan in State Bank of India by last year. The charges are normal. I have spend down payment nearly 1L out of 7L. The branch is near to my residence so will never contact the customer service. The process was immediate and it was completed within 2 days.
      Was this review helpful? 1
      , hyderabad
      Reviewed on Jan 12, 2019
    • HDFC Bank Car Loan
      "Its Excellent"
      0.5 4.5/5 "Excellent!"
      HDFC gave me the door step service for the car loan. I took the loan before three years. It was the fantastic experience for me because I got the better interest, I took the loan for 5 years but I done the foreclose in three years , there was no charges for it.
      Was this review helpful? 1
      , ahmedabad
      Reviewed on Jan 11, 2019
    • Capital First Car Loan
      "Good service"
      0.5 3.0/5 "Satisfactory"
      The process in getting my Car loan from them has been quite good and the process went smooth. The loan amount was sufficient but the interest rate with them has been quite high when compared with the market rate. Their customer support and their response has been good and has been helpful as well.
      Was this review helpful? 1
      , bangalore
      Reviewed on Jan 10, 2019
    • HDFC Bank Car Loan
      "Very Good Service"
      0.5 4.0/5 "Great!"
      My car loan experience with HDFC has been good and the loan amount which they had provided has been sufficient. The interest rate with them has been nominal and there has been some charges like processing fee. Overall their has been a help from their customer support as well.
      Was this review helpful? 1
      , pune
      Reviewed on Jan 09, 2019
    • HDFC Bank Car Loan
      "Average Loan Service"
      0.5 3.0/5 "Satisfactory"
      I have approached the bank directly for my car loan. Since I'm existing customer of HDFC for 13 years, i have chosen them. I purchased the loan amount of Rs. 2 lakhs. They have offered me a interest rate of 16% In October 2018, i have closed this loan. Total tenure period of the loan was 3 years. Car Dealer has recommended me about this loan.
      Was this review helpful? 4
      , srikakulam
      Reviewed on Jan 09, 2019
    • Magma Car Loan
      "Average service"
      0.5 1.5/5 "Bad"
      I have been using my car loan with Magma Fincorp previously, they have given me sufficient loan amount ,the rate of interest they have charged me was high,and the processing fee they have charged me was high , i was not happy with there service.
      Was this review helpful? 2
      , ghaziabad
      Reviewed on Jan 08, 2019
    • HDFC Bank Car Loan
      "Good service"
      0.5 4.0/5 "Great!"
      I have been using my car loan with HDFC bank, there service is too good, the loan amount they have given me was sufficient,the rate of interest they have given me up to 9% which is nominal for me,and the processing fee they have charged me was nominal only they have charged me up to 1% only,and still my loan is running ,there was no hidden charges they have charged apart from that,overall service is good.
      Was this review helpful? 1
      , ghaziabad
      Reviewed on Jan 08, 2019
    • HDFC Bank Car Loan
      "Nice offer and nice loan"
      0.5 4.0/5 "Great!"
      I had a car loan with HDFC 1 year back. They have given me a nice offer hence i opted the loan with HDFC. I'm not sure about the partial payment and pre-closure facility. They have given me a nice interest rate according to what i want. I was taken a loan amount of Rs. 3 lakhs.
      Was this review helpful? 0
      , new delhi
      Reviewed on Jan 08, 2019
    • review Car Loan
      "Need to reduce the charges"
      0.5 3.5/5 "Pretty good"
      I have taken a car loan in Nissan Institution, it was good. I bought the car from same showroom and they have provided me a facility. The rate of interest was high. The documentation procedure was simple. I have taken the loan almost 2 years back and its still running. The loan tenure is 5 years.
      Was this review helpful? 0
      , mumbai
      Reviewed on Jan 08, 2019
    • HDFC Bank Car Loan
      "Looking for less interest rate"
      0.5 4.0/5 "Great!"
      My car loan experience was good with HDFC bank, loan amount was sufficient and the rate of interest was high when compared to other banks. Customer service was good and they responded on time. The tenure period for this car loan is for 5 years.
      Was this review helpful? 0
      , new delhi
      Reviewed on Jan 08, 2019
    • ICICI Bank Car Loan
      "Excellent service"
      0.5 5.0/5 "Blown Away!"
      I have been holding my car loan with ICICI bank, the rate of interest they have charged me was nominal and they have charged me processing fee they have charged me which was nominal, the loan amount they have given me was sufficient according to the car price i got my loan, still this loan is running,overall service is good.
      Was this review helpful? 2
      , new delhi
      Reviewed on Jan 08, 2019
    • IOB Car Loan
      "Excellent service"
      0.5 5.0/5 "Blown Away!"
      I have been holding my car loan with Indian overseas bank, the loan amount they have given me was sufficient, they have charged nominal rate of interest they have charged me up to 9 % which was nominal and there is zero processing fee , so far there service is have experience was good, they have not taken any hidden charges ,there overall service is good.
      Was this review helpful? 1
      , mumbai
      Reviewed on Jan 08, 2019
    • HDFC Bank Car Loan
      "Good loan experience with HDFC"
      0.5 4.0/5 "Great!"
      My car loan running with HDFC bank, the customer service is super and the fast approval on the disbursement. They taken 15 days to deliver the car. The principal amount is Rs. 4 lakhs for the tenure of 5 years, the car model is baleno which is latest.
      Was this review helpful? 1
      , aligarh
      Reviewed on Jan 07, 2019
    • ICICI Bank Car Loan
      "Very Good Service"
      0.5 4.0/5 "Great!"
      The process in getting this loan was quite good and there hasn't been any hassle faced. The loan amount which they had provided has been sufficient and the interest rate with them has been nominal as well. There has not been any sort of additional charges which was made by them.
      Was this review helpful? 0
      , pune
      Reviewed on Jan 07, 2019
    • Axis Bank Car Loan
      "Good Car Loan"
      0.5 4.0/5 "Great!"
      Purchased my car loan 4 years back. I have chosen the Axis bank because the rate of interest was less when i compared with others. I have taken a loan amount of Rs. 3.50 lakhs and the tenure period for the loan is 5 years. I have been paying the EMI of Rs. 8000. I have got the loan as per they have promised time.
      Was this review helpful? 2
      , bangalore
      Reviewed on Jan 07, 2019
    • Bank of Baroda Car Loan
      "Good service"
      0.5 4.0/5 "Great!"
      It has been a good experience i had with this loan. The loan amount which they had provided has been sufficient and the interest rate with them has also been nominal, there has not been any sort of additional charges which they had made for this loan.
      Was this review helpful? 0
      , bangalore
      Reviewed on Jan 07, 2019
    • HDFC Bank Car Loan
      "Average Loan Experience"
      0.5 3.0/5 "Satisfactory"
      I have taken my car loan in 2015 with HDFC. I have purchased the loan amount of Rs. 5 lakhs approximately. I have done a pre-closure. I have completed the loan in 2.5 years There is no pre-closure charges. They have given me a interest rate of 8% and the EMI amount has been deducted from my account automatically.
      Was this review helpful? 1
      , mumbai
      Reviewed on Jan 07, 2019
    • HDFC Bank Car Loan
      "Interest rates are high"
      0.5 3.0/5 "Satisfactory"
      My car loan was purchased from HDFC Bank in 3 months before. I have purchased a loan amount of Rs. 5.21 lakhs and i have received the loan within a month. They have given me a offer for taking the car loan and there is a lesser documentation for this loan since i have taken loan already with them. I am making the EMI of Rs. 12500
      Was this review helpful? 0
      , mumbai
      Reviewed on Jan 07, 2019
    • HDFC Bank Car Loan
      "Excellent service"
      0.5 5.0/5 "Blown Away!"
      I have been holding my car loan with HDFC bank for long time , the loan amount they have charged me was sufficient, the rate of interest they have charged me was nominal, and the processing fee they have not charged me it was zero processing fee,overall service was good.
      Was this review helpful? 2
      , bangalore
      Reviewed on Jan 06, 2019
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