About Car Loan

A car loan (also known as an automobile loan, or auto loan) is a sum of money a consumer borrows in order to purchase a car. Generally speaking a loan is an amount of money that is lent to an individual, a business, or another entity. The party that lends the money is known as the lender, while the party borrowing the money is called the borrower. When taking out a loan a borrower agrees to pay back the full loan amount, as well as any interest (a percentage of the loan amount, usually calculated on an annual basis), by a certain date, typically by making monthly payments.

Car loans follow most of the same rules and procedures that apply to other loans. In most cases when purchasing a car, a borrower will specifically apply for a car loan; however, a consumer can also use a personal loan (a loan obtained by an individual to use at his or her discretion) for the same purpose.

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Features & Benefits

The followings are the ways a Car Loan can be benefitted:

Get financing for purchasing new and used cars.

The financing can go up to 85%-90% of the on-road price of the car. Some banks offer up to 100% financing on the vehicle’s on-road price to certain conditions.

The loan tenure can range from one year up to seven years.

The loan amount can be up to three times the annual income of the applicant.

Some lenders offer instant financing facilities for cars.

The car purchased through financing will be held as collateral until the loan is repaid.

Eligibility Criteria

To qualify for a Car Loan, you have to meet certain criteria. Below are the important factors that lenders take into consideration to decide your eligibility for a Car Loan.

  • The applicant should be residing in India, be it in rural, semi-urban or urban India.
  • The age limit of the applicant for applying for a car loan should be at least 18 years or a maximum of 75 years.
  • He/she should have a monthly income of Rs. 10,000 or more as the case may be.
  • The applicant should be either a salaried or a self-employed individual with at least 2-3 years of working experience.
  • The applicant should have an approved residence with a good amount of parking space inside or outside.
  • He/she should have a residential stability of at least one year.

Documents Required

Below is some of the basic documents which are required at the time of Car Loan

A valid identity proof

The applicant should provide a valid ID proof which can be a PAN card, AADHAR card, driving licence, passport or any other identity document issued by the government.

An age proof

As the applicant should be at least 18 years of age, he/she should provide a supporting document that states his/her age clearly.

A valid address proof

It is extremely crucial to provide a government issued document that has the present address mentioned. It can be an AADHAR card, PAN card, etc.

An income proof

The individual must submit its Income Proof which maybe bank statement, salary slips, ITR file etc.

Signature verification

To ensure your signature is unique, a signature verification proof is required.

Recent photographs

Two copies of photographs, ideally two passport and stamp size photographs should be kept handy.

Frequently Ask Questions

If you have a question that deals with clients, customers or the public in general, then have a look at some of the basic FAQs.

A car loan is a financial arrangement where a lender provides funds to help you purchase a vehicle. You repay the loan in installments, often with interest, until the loan is fully paid off.

You apply for a car loan from a lender, and if approved, you receive the funds to buy the car. You then repay the loan in monthly installments over a predetermined period, typically 2-7 years, until the loan is paid off.

The interest rate is the cost of borrowing, while the Annual Percentage Rate (APR) includes both the interest rate and any additional fees, providing a more comprehensive view of the loan's total cost.

Yes, many car loans allow prepayment. However, some lenders might charge prepayment penalties, so it's crucial to review the terms before making extra payments.