If you really think about it, it's easier getting a loan for a car than a loan for bus fare!
Currently, the interest rate on the Pushpaka scheme is at 9.20% p.a. The following table depicts a clear picture of the interest and other expenses you could incur on your car loan.
| Particular | Charges |
|---|---|
| Charges | Amount |
| Interest rate | 9.20% p.a. |
| Processing fee for loan up to Rs.5 lakh | 0.50%, minimum Rs.500 |
| Processing fee for loan above Rs.5 lakh | 0.60%, maximum Rs.10,000 |
| Repayment tenure for New car | 84 equated monthly instalments |
| Repayment tenure for Used car | Flexible payment option subject to a maximum of 84 months minus the age of the vehicle. |
| Income requirement | Take home pay should be more than 50% of the gross salary after insurance and PF deductions. |
Indian Overseas Bank offers vehicle loans that cater to even those in a lower income bracket. If you are earning at least Rs. 8000 per month, including your spouse’s income, you can apply for a car loan. You can get a loan for the purpose of buying a new or used car. The vehicle loan scheme is known as Pushpaka and comes with attractive interest rates. You can get finance for up to 90% of the value of a new car and up to 75% of the value of a used car. The used car shouldn’t exceed 5 years of age. You can repay the loan in easy EMIs that can span across 84 months. Indian Overseas Bank helps you purchase the car you always wanted easily with convenient loan options.
If you want to know the total interest you would pay on your loan, simply log onto BankBazaar.com and use the Car Loan EMI calculator. This is a handy tool for any car loan applicant. You can find the calculator under “Finance Tools” on the home page.
To use the calculator, follow these simple steps.
The results generated will show you a clear picture of your loan. You can see the EMI amount you will be paying every month during the tenure of your loan. It will also give you the total interest payable and the total amount you will pay back at the end of the loan. Furthermore, the amortization schedule gives you a complete breakdown of the components, that is the principal amount and the interest of each EMI.
Alternatively, you can use the following formula to calculate your EMI manually.
E = P*r* [(1+r)^n/(1+r)^n-1)]
E = EMI
P = Principal Loan Amount
r = rate of interest per month
n = tenure in number of months
Amortization schedule
The following schedule is based on a Rs. 2 Lakh Indian Overseas Bank Car Loan sanctioned in 2019 for the purchase of a new car taken for a tenure of 3 years. The Indian Overseas Bank Car Loan interest rate 2019 is 9.20%.
| Year | Principal Paid (A) (Rs.) | Interest Paid (B) (Rs.) | Total Payment (A+B) (Rs.) | Outstanding Loan Balance (Rs.) |
|---|---|---|---|---|
| 2019 | 60,659 | 15,885 | 76,544 | 1,39,342 |
| 2020 | 66,480 | 10,064 | 76,544 | 72,861 |
| 2021 | 72,864 | 3,683 | 76,547 | 0 |
Income
The Indian Overseas Bank requires you to show at least Rs. 8000 income per month to avail of a car loan. You can also add your spouse’s income to make up the income eligibility. Furthermore, the take home pay should be more than 50% of the gross monthly salary. A lower income means a higher risk for banks when they give you a loan. But if your income is much higher in comparison to the car of your choice, you might be able to negotiate better terms and conditions including interest rates on your car loan.
Credit Score
Credit scores play an all-powerful role these days when it comes to applying for a loan. A good credit score is directly related to your loan approval. Banks need assurance that you will be able to repay the loan. Based on your past credit history, banks can take a call on what kind of customer you will be during the tenure of your loan. If you have a good credit score, banks can have faith that you have good repayment behaviour. With a good score, you are in a better position to bargain for better interest rates.
Down Payment
Banks take a risk when they loan you money. The more money there is to recover, the higher the risk. A large down payment means that the loan amount is significantly lesser. Therefore, in the event you are unable to repay the loan, banks have a much smaller amount to recover. So, making a larger down payment is more favourable towards your loan. You stand to get better terms on your loan including interest rates when you make a significant down payment.
Loan tenure
The Indian Overseas Bank allows you to take a car loan for a maximum tenure of 84 months. The longer your tenure, the more interest you pay. A long tenure allows more time for things to happen. Unfortunate events that could lead to you being unable to pay the loan is a big risk for banks. Therefore, a shorter period of time means lesser risk. A long tenure will increase your total interest paid.
Car Model
The value of a car depreciates once purchased and used. In case you are unable to pay the loan back, banks have no choice but to seize and sell the car to recover the loan money. Certain car models retain a high value while others depreciate much faster. Choosing a car that depreciates faster means the money the bank can recover is much lesser. This could lead to stricter terms and interest on your loan. The opposite applies when the car model doesn’t lose its value so easily.
Age of the car
Used cars are trickier to buy. The condition and age of the car will greatly affect its value. Indian Overseas Bank will sanction a loan for a used car up to 5 years old. A younger car could mean it’s in better running condition. The resale value of the car will be much higher, and this means the bank will be able to recover a good amount in case they need to seize and sell the vehicle. This increases your chances to get better interest rates on your car loan.
How CIBIL scores affect Indian Bank Car Loan Interest Rates
CIBIL, the Credit and Information Bureau of India Limited, plays a pivotal role in the credit world of our country. The Bureau keeps a track of all credit customers’ history. Banks record credit behaviour, spending patterns, over the credit limit spends, defaults on payment, timely payment, and so on. This information is submitted to CIBIL and is maintained for future purposes.
When you apply for a loan, your bank will make an inquiry about your CIBIL score. A high score means you have been a good credit customer in the past and banks will be happy to sanction your loan as they have assurance that you will pay back your loan. Paying EMIs duly and on time is important when you take a loan.
On the other hand, when you default on payments, pay only the minimum due on credit cards, spend erratically or irresponsibly, the banks are more apprehensive about your credibility. If you do manage to get a car loan with a low CIBIL score, the terms and conditions on your loan will be much stricter. Your interest rates may also be increased as you are a risky customer. Therefore, maintaining a good score will help your loan process become easier and smoother.
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