FAQs on Car Loan
How do I get an Auto Loan?First, shop around for all the various finance schemes on Auto Loans available in the market • by applying on deal4loans.com. You can then decide from margin money schemes, advance EMI's schemes and deposit payment schemes. Usually margin money schemes offer the best terms, but at the end of the day, effective interest rate of the loan is what essentially matters. This method provides a common podium for assessment of different schemes by discounting on the basis of cash flows.
How much loan can I get? The amount of the loan depends upon:
1. The cost of the vehicle.
2. The type (standard/premium).
3. The percentage financing offered.
If you are buying a new car, you can get up to 90% financing but some banks have a limit beyond which they do not offer loans.
Also different banks have different terms for different models (standard/premium, new/old)
The percentage of finance the banks give on cars is also determined on the basis of second-hand market value of that particular car.
This is for cases, if default by any chance, the banks can get a higher resale value for the car.
This makes the banks comfy enough to give higher percentage finance.
For income proof, most banks look at your IT returns for the last two years and also at the nature of income. However some banks do not consider speculative income - from the stock market, rental or agricultural income. Some banks discount such income by up to 50% in their workings.
How long does it take to process the loan?If all the required documents are in order, your process moves fast. You need to submit requisite documents like salary slip, tax returns, proof of residence, bank statements etc. The processing will take between 2 to 7 days.
Is it necessary to have an account with the bank from which you take a loan?There is no such compulsion for you to have an account with the bank. Normally banks have no problem in giving auto loans to people who do not have an account with them. However there may be certain privileges you may enjoy with having an account of the same bank you take a loan from.
Is it better to go to my current bank for loans?Well if you have a good repayment record for an earlier transaction, YES! You are also most likely to get a lower lending rate and your process is sure to move faster. However, do check out some other offers from other banks as well, before taking a final decision.• And this is where deal4loans.com can assist in getting you multiple quotes from various banks really fast.
Do I need to give collateral to get a loan?No, you don't need to give collateral. But you will have to hypothecate the car in the banks name and an endorsement made in the Registration Certificate (RC) book of the vehicle.
Is credit profile important?To banks, your credit profile is the most important factor they will consider before funding you. Your credit profile tells banks if one is able to and intend to pay back the loan.
What are the detailed components of my credit profile?The components of credit profile are age, profession/occupation, income/financials, previous credit history etc.
What can I do if my credit profile does not match the banks requirements?If your credit profile does not match the banks requirement you can reinforce it by bringing in a co-applicant/guarantor who would be able to match the requirement.
Can I get auto loan without the submission of income documents?Yes you can, under the No Income Proof scheme offered by some banks.
Can I increase the amount of loan that I can take and how?Yes, you can.You can increase the amount of loan sanctioned by clubbing your spouse's income. The spouse then becomes the co-applicant.
Do I need a guarantor and who all qualifies as one?Yes, you need a guarantor. The guarantor could be your father, mother, son, daughter, husband, brother, sister, son's wife etc et cetera. However for consideration of these relatives as guarantors for the loan, they should comply with the age and other such norms of the company.
What is the extent of liability of a co-applicant and the guarantor?A co-applicant has as much responsibility as the primary applicant and is equally liable to the banks from which the loan is taken. The guarantor however, promises to pay the bank in case the applicant(s) default on the payment. Both the co-applicant and the guarantor are liable for re-payment and the banks have the right to collect from either or them.
Is EMI a proper measure for comparing the deals of various players?Not really. There are other charges like processing fees, advance EMI's, other up-front payments (stamp charges), registration charges, insurance which need to be factored in before comparing the various deals.
Can I reduce or change my EMI?Once you have signed the agreement with the loan provider, the EMI cannot be altered. So only after you are satisfied with the EMI agreed upon with the banks, sign the dotted lines. However you can pre-pay the loan amount in which case there will be some penalty.
How do I pay the Equated Monthly Installment (EMI)?Normally, all banks ask for a Post Dated Cheque (PDC) for the entire repayment period or at least for the first two years. Sometimes, the installment is directly taken from your salary if there is an agreement between the bank and your employer.
How is annual reducing balance different from monthly reducing balance?In an annual reducing basis, the outstanding principal gets adjusted once a year while in the monthly reducing balance; the principal gets adjusted on a monthly basis. Therefore, more of your principal gets repaid in monthly reducing basis than in annual basis. However, some banks, calculate EMI's on a daily or a quarterly basis too.
How is the interest calculated?The interest is usually calculated on a flat rate or on a reducing balance which can be either daily, monthly, quarterly or annually.• You can use the online calculator from deal4loans.com to do the quick maths on EMI.
Can interest rates be negotiated?Yes, it is possible for you to negotiate the interest rates in almost all the cases with all the banks. The interest rates can be reduced by as much as 2% if you satisfy the criteria set forth by the banks for claiming such reduction. So do check out all possible banks for such deductions.
Floating rate of interest or a fixed rate of interest?A loan taken on floating rate of interest is a better option when the interest rates are falling, but when the interest rates are rising, opt for a fixed rate loan. Also if you go for a fixed rate loan, you will know in advance what your EMI's will be like and this will help you in your financial budgeting. If you choose a floating rate, you may not be able to budget properly. So do the math and choose wisely.
What is Flat interest rate and Reducing Balance interest rate?Suppose you have taken a loan of Rs.10 lac at 5% interest. You repay Rs.50,000 in the first installment. If the 5% interest continues to be applicable on Rs.10 lac after your first repayment, you are paying a Flat Interest Rate. But, if 5% interest is applicable now on Rs.9.50 lac, you are paying a Reduced Balance Interest Rate.
How long can I get loan tenure for?Usually auto loan tenure is available from 1 to 5 years. However some banks with schemes, offer loans tenure for 7 years. The tenure also depends on the type of car you wish to purchase. If it is a super-premium car the tenure is restricted to 3 years only. Also know that, higher the tenure, lower is the EMI. But the total interest outflow is higher.
Can I pay off my car loan before the tenure is up? Yes you can pay-off your car loan before the tenure is up by pre-paying your loan amount.
But there may be certain rules regarding the pre-payment that your bank may have. Also you may have to pay a small penalty, normally, a percentage of the loan amount that remains outstanding.
Some banks however do not penalize you if you decide to pre-pay.
Take this aspect into consideration when you choose a bank to take loans from because if later on, you can get a loan at a lower rate of interest, this penalty could compensate whatever you could save through the interest rate differential.
• Apply for a Car loan now
Yes you can change the tenure and amount of the loan. But this would imply that the interest rate and the amount of installment will change accordingly.
Can I sell my car before I repay my loan?NO. You cannot sell the car unless you repay the loan. An NOC is required from the banks before you can sell the car.
Can I get a temporary relief from paying my installments?Yes, in some cases you can. You need to inform your bank in advance. This should only be for a few days and you will have to pay delayed payment charges.
What happens if I delay some installments?Delaying your installments frequently may affect your credit profile and might make further borrowing not only difficult but costly too. However, in some rare circumstances, if you delay an installment, most banks would charge you a delayed payment charge, as high as 3%, compounded monthly.
What happens if my cheque bounces?Dishonoring a cheque is a criminal offence. Legal actions may be initiated against you and your credit profile could be seriously damaged.
What is a default?Frequent prolonged delays and dishonored cheque are deemed to be defaults in repaying your loan. Most banks would expect you to turn in the asset on request, failing which they may seize your car, after serving you proper notice.
Can I get finance for car-accessories?Most banks do not finance car-accessories other than those which are factory fitted like air-conditioners. Some may however fund music-systems and other such expensive accessories.
Can I get 100% car financing?You can, but it involves a trade off. You will either have to pay advance EMIs or a deposit, so you never really get what they promise you. So find out from different banks where you can get the best options from.
What is an Exchange Scheme?Some dealers may offer you an exchange scheme whereby your existing car can be upgraded to a new one. The dealer will purchase your car at a price depending on the model, year and the condition of the car. The value of your old car is then adjusted against the purchase price of the new car. You could also get the balance amount financed.
What is Zero Interest Scheme?Zero Interest Scheme is just that, Zero Interest Scheme. In this scheme you are not charged any interest and you only pay back the principal amount. But under such scheme, the amount financed is low and the tenure is short. However there are hidden costs involved under this scheme as well.
What happens after I have paid the last EMI?After the last payment is made, get the lien of the bank on your car cancelled. The bank will issue Form 35 with a covering letter (NOC) to the RTO for canceling their name from the R/C book. A similar NOC will also be issued to the insurance company requesting for the deletion of their name from the policy.
Can I get finance for insurance and registration?Most financiers do not cover Insurance and registration. The ex-showroom price is considered which does not cover insurance and registration charges.
What happens if the car meets with an accident?In the event of an accident, the first step is to inform the insurance company. The company then sends a surveyor to assess the extent of damages to the car. Your claim is then processed and paid directly to the banks, unless you have taken an NOC from the banks, in which case the payment will be made by the insurance company in your favor. The bank normally gives you an NOC if you are regular in your payments. In case of a complete loss, the bank would receive the payment directly from the insurance company.
What is De-Dupe?Most banks have compiled a list of defaulters. It has compiled defaulters from its own bank and also from other available sources from other banks. Details of all clients are run through this list to check if the same client had applied for a loan. If the client is the same, the file is rejected. Read more about car loan!
