What is a Car Loan?
A car loan is a secured loan provided by banks and financial institutions to purchase a new or used vehicle. The vehicle itself serves as collateral for the loan.
What is the maximum car loan tenure?
Most banks offer car loans for a maximum tenure of 7-8 years. However, shorter tenures of 3-5 years are recommended to avoid long-term depreciation and save on interest costs.
How much down payment is required?
Banks typically finance 80-90% of the car's on-road price. You need to arrange the remaining 10-20% as down payment. Higher down payment reduces your EMI burden and interest cost.
What affects car loan interest rates?
Car loan rates depend on factors like your credit score, income stability, down payment amount, car type (new/used), lender policies, and market conditions. Good credit scores fetch lower rates.
Can I prepay my car loan?
Yes, you can prepay your car loan partially or fully. Some lenders may charge prepayment penalties, so check your loan agreement. Prepayment reduces interest burden significantly.
What documents are required for a car loan?
Required documents include: Identity proof (Aadhaar/PAN), address proof, income proof (salary slips/ITR), bank statements, photographs, and vehicle quotation/invoice from the dealer.
Should I choose new or used car loan?
New car loans have lower interest rates (7-10%) and longer tenures. Used car loans have higher rates (10-14%) and shorter tenures (3-5 years). Choose based on your budget and car condition.
What is the difference between on-road and ex-showroom price?
Ex-showroom price is the base car price. On-road price includes registration charges, road tax, insurance, and other fees. Banks finance based on on-road price, not ex-showroom price.