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  • Loan against Car is Rated as "Great!" by 95808 Users

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    Loan against Car

    The concept of loans against cars is a very common concept during financial emergencies. If you are struggling to get a personal loan to take care of your personal needs, you can apply for a loan against your car. That’s right! Many a time, your car can act as your best friend in dire situations.

    Most lenders may not be ready to give you an economically priced personal loan if you do not meet the required eligibility criteria. In such cases, you could apply for a loan against your car. When you use your car as a collateral or asset for your loan, your chances of getting your loan application approved will be higher. There are a few banks and non-banking financial corporations in the country that offer loans against cars.

    How does a Loan against Car Work?

    In most cases, the lender will offer a loan of up to 70 to 85% of the prevailing market value of your car. Your loan amount will be pre-fixed as per the value of your automobile. This value will most likely be fixed with the help of car experts who are appointed by the lender. Generally, the loan amount provided for a loan against car ranges from Rs.50,000 to Rs.7 lakh. You can utilise your loan against car for any personal requirements or even for buying a new car.

    When your loan against car is approved, you will be required to hypothecate your automobile to your lender. Hence, this step will prevent you from selling your car until you repay your loan entirely. A loan against car is typically given for a period of 24 months. This can differ from lender to lender.

    In case you decide to pre-pay your loan against car, you will be required to give a pre-payment penalty. This charge will be determined according to when you foreclose during your loan tenure.

    Advantages of Loan against Car

    • When you choose a loan against car, your interest rates will generally be low. It will not be as high as the interest rates of regular loans.
    • You will receive up to 85% of the prevailing price of your automobile.
    • There are not much strict eligibility criteria that need to be followed for getting a loan against car.
    • In case you pledge or furnish your new car for this type of loan, your loan amount will be equal to the overdraft limit after deducting the unsettled dues of your actual car loan.
    • A loan against car is very helpful when you require urgent funds for any kind of need.
    • This loan can be taken even if you purchased your car with a car loan.

    Eligibility Criteria for Loan against Car

    A loan against car is a great alternative when your personal loan application or car loan application gets denied. For personal loan applications, you will typically need to have a steady income with a good employment status. You will also need a high credit score to get a good interest rate for your personal loan application. In case you fail to meet any of the necessary eligibility criteria, you can apply for a loan against car as this loan category does not have strict eligibility criteria.

    However, you will need to meet certain basic criteria in order to get your loan against car application approved:

    • Lenders generally prefer cars that are not more than 5 years old.
    • Lenders prefer cars that are still produced in the market. There are certain lenders that do not accept cars as collateral if they are not manufactured in the market anymore.
    • For loan applicants, there will be an age criterion. The minimum age requirement is usually 21 years and the maximum age requirement is usually 60 to 65 years.
    • Salaried employees, self-employed individuals, and private limited companies can apply for a loan against car.
    • Applicants should be earning a decent minimum monthly income while applying for this loan.

    Documentation Required for Loan against Car

    While applying for a loan against car, one should compulsorily apply for a loan against car:

    Proof of age:

    • Voters ID card
    • Photo ration card
    • Passport
    • PAN card
    • Employer’s certificate

    Proof of identity:

    • Voters ID card
    • Passport Copy
    • Photo ration card with your date of birth
    • Driving license
    • PAN card

    Proof of income:

    • Most recent Form 16 or ITR
    • Most recent salary slip
    • Salary account statements

    Proof of address:

    • Telephone bill
    • Passport
    • Employer’s certificate
    • Credit card statement
    • Photo driving license
    • Photo ration card

    Legal Documents for Your Car

    When you intend to submit your car as a collateral for a loan against car, you need to keep the following documents ready:

    • Valid motor insurance policy documents for your car
    • Registration certificate for your car (RC book)
    • Driving license for car

    Aspects that Determine the Quantum for Loan against Car

    Your quantum for a loan against car will be determined by:

    • Your car model and make
    • The age of your automobile
    • The total usage of your car
    • The reputation and fame of your car model

    Aspects that Determine the Tenure for Loan against Car

    The loan tenure for a loan against car will depend on:

    • The model and make of your vehicle
    • Your loan quantum
    • If you have a car loan amount or not

    Loan against Car When You Have a Car Loan

    In case you had purchased a car with the help of a car loan, you can still apply for a loan against car depending on your requirements. You may also be able to get a top-up loan very easily when you are already repaying a car loan. Your top-up loan will be disbursed in around 2 to 4 days. The loan tenure for this top-up loan option for existing car loan borrowers is up to 3 years. This is also a pretty common way of securing additional funds for your personal purposes.

    Pre-Approved Loan against Car

    There are certain banks and NBFCs in the country that provide pre-approved loans against cars for a few of their exclusive or privileged customers. The advantages of these pre-approved loans against cars include quicker loan processing and approval, immediate loan disbursal procedures, etc.

    How to Apply for Loan against Car?

    There are a few select banks and NBFCs that provide loans against cars. You may apply offline or online for these loans. You can either visit the official website of your lender or a third-party financial website to make comparisons before applying. You may also call a bank to get help for applying. Before applying, you could use an online EMI calculator to determine the EMIs for your loan against car.

    To apply offline, you can directly go to lender’s branch and complete your application process. A branch executive will help you throughout the application process.

    How to Close Your Loan against Car Responsibly?

    Once you finish paying all the EMIs for your loan against car, you will have to collect a No Objection Certificate (NOC) from your bank. You will then have to furnish this NOC at your Regional Transport Office for getting your car’s hypothecation removed since you have completely repaid your loan against car. Only then, your car’s Registration Certification will be transferred to your name again.

    Top Lenders for Loan against Car

    • HDFC Bank
    • Axis Bank
    • ICICI Bank
    • Kotak Mahindra Finance

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