Buying a new car is considered a huge investment in India as well as an important financial decision and most people takes loan from either banks or other financial institutions for buying a car. Although many people know about the loans offered by financial insitutions as well as related requirements but many people are there who does not have much idea about the paper works required and bank charges. For people who are less well versed with the loan process, here are some tips to help you. It is always better to take loans from PSU banks as they offer loans with less interest but the whole process is slower and nags a bit as compared to private banks. However, taking car loans have become quite easier as compared to earlier times. Here are some information related to car loans. Eligibility Before applying for car loan, you should know whether you are eligible to apply for loan or not. People falling under categories of salaried employees, high net worth individuals, staff members, people occupied with business, retired employees of banks(except compulsorily retired or dismissed employees), senior citizens, directors of companies, commerce or trade, farmers, pensioners, self-employed, professionals are all eligible to apply for loan. However, loans are not granted to undivided Hindu families. Amount of loan given Most often car loans are given as per the income of an individual who has applied for loan, previous loan track record as well as the car model. Usually, about 2.5 to 3 times of the annual salary for salaried professionals or six times the annual income for self-employed professionals as ascertained by income taxreturns of the previous three years is given as loan by banks. Banks also provide 75% to 95% of the ex-showroom price of a new car as loan. However, the upper ceiling differs from bank to bank depending on the applicant. For corporate houses and companies the upper ceiling is Rs 1 crore, while for Indian nationals buying a first hand vehicle it is Rs 25 lakh, which is increased to Rs 75 lakh in cases where the vehicle is imported. Additional Charges There are also hidden cost or rather extra payment involved in loans, which include pre-payment fee, processing fee and late payment charges. The processing fee is generally a percentage of the loan amount and varies from 0.1 to 1 per cent for car loans. For loans up to Rs 25,000 a one time fee of Rs 1,000 is charged while for amounts from Rs 25,000 to Rs 25 lakh the fee is 1.1 per cent with a maximum limit of Rs 5,000 and a minimum of Rs 1,500. For loans of over Rs 25 lakh, the fee is 0.25 per cent which should not exceed Rs 15,000. Most banks penalise you for repaying the loan before time as they have a loss in their income through interest. You will also be charged if you miss to pay an instalment, which is 1 and 2 per cent as penalty along with the next EMI paid or with the EMI that is paid after the due date has passed. Bank also charges Rs 200 to Rs 450 as penalty for cheque bounce and Rs 250 to Rs 500 as documentation charges. Document required and paper work Mainly three documents are required for car loan, which include identity proof of any kind such as voter ID, passport, driving licence, PAN card, ration card, etc. , your residence proof and income proof. You need to provide income proof if you are salaried people is salary slip, Form 16 for the previous financial year, and bank statements for the previous 6 months. Self-employed people need to provide their IT returns for the previous two years. Apart from these documents that you need to furnish in the bank, other paper works include power of attorney, which the dealer gets the vehicle registered in your name in the RTO office. Check the terms and conditions of loan Make sure that you check the terms and conditions of the loan before applying. It is very important to check the minutest details as banks generally try to hide the additional cost and you might miss it so it is vital to check all the details before signing the papers. Compare All Available Schemes To get the best deals on car loans, compare all the available schemes and choose the best one that suites you better. One can always take an insurance over the car loan to prevent any loss due to an untoward and unforeseen incident.
