Things You Should Know about Car Finance | Best way to finance a Car | How to finance a car through a Bank | Car loan
How to finance a car in India
Car finance allows the customer to buy the vehicle upfront and pay later, in equated monthly instalments. A Car loan is one of the complex loan products in India as car dealers tend to include various discounts offered by car manufacturers or banks and other financial institutions in the interest rate offered to the buyer.... Some lenders even offer special rates of interest to existing customers.
In this blog we will come to know about how to finance a car and how to Finance a Car through a bank.
Should I Buy a Car on Cash or Finance?
since the interest rate on car loan is about 8 to 9%. so if you think you can earn more than 9% of your money by other sources then you should definitely go for a loan and invest your cash in mutual funds or other funds.
If you don't have money at all and you need a Car then, Car loan is best option.
How much maximum loan is allowed for Car Finance?
Private sector banks finance about 85% of the on road price of car while public sector banks offer you more. They finance about 90% of the overall price of the car.
Interest rate of both sectors vary from 8 to 10%.
Should I take a fixed interest rate or floating interest rate?
Look at the lowest interest rate of last 15 years and observe the lowest rate.
If you are getting the finance at 8 to 9 % then go for fix interest rate and if at the time of your purchase, the interest rate is greater than 10% then go for the floating interest rate.
How to handle the Tenure?
Tenure is basically the conditions under which land or buildings are occupied. tenure durations are roughly 3years or 5 years or 7 years at most. so while calculating the EMI be sure that your tenure period is not more than 7 years.
here is the link to calculate your EMI& Tenure- https://emicalculator.net/loan-calculator/
What is Foreclosure charges for Car Finance?
Well this is the word which frightens the customers.
If the customer want to pay the loan before the loan tenure then the bank may charge a prepayment penalty, which is called foreclosure charges. But as per the RBI banks cannot charge a foreclosure loan on the customer.
what are conditions of banks for finance for customer | what are requirements of customer to get a Car Finance?
Banks look for the following things in their customer for Car Finance-
1.Customer's salary- they look for it to get the loan eligibility of the customer i.e. how much loan can be given to you.
2.Customer's credit score(your previous EMI history )
What are the documents required for the Car Finance?
3.Salary Documents -Income statements
4.Income Tax Returns of 2 years.
How much part of your salary should be used for Car Loan EMI?
An intelligent person spends about 25% of his overall salary on car loans. Don't spend more than that on car loans because there can be any emergency or there could be a requirement of new loan. As i have told earlier that 50% of your salary can be used as for Loan Payment so in case of emergency you can use your remaining 25%.
After all these discussions I would like to conclude the
points to remember while taking the Car loan
3.Nature of Interest Rate