Car Loans – Meaning, Features and Eligibility in 2024
Owning a car used to be a luxury commodity. But in today’s economically developing world, cars are a necessity and a convenience for traveling from one corner of a sprawling city to another.
While everyone may not have enough cash for a one-time payment to buy a car, there are many lenders that can help you realize your dream of buying a car with an auto loan.
Applying for a car loan is now hassle-free, simple and paperless. With just a few clicks, you can submit an auto loan application form online. These days, almost every bank offers car loans at attractive interest rates. Depending on one’s affordability, it is now easy to apply for a car loan and then pay EMIs without really affecting one’s financial situation.
Top Auto Loan Rates 2024
Bank Name Auto Loan Rates
- State Bank of India 70% p.a.
- ICICI Bank Annual Interest Rate 7.00%
- Indian Overseas Bank 25% p.a.
- Bank of Jammu and Kashmir 30% per annum
- Canara Bank 40% p.a.
- HDFC Bank Annual Interest Rate 7.50%
- Karur Vysya Bank annual interest rate 7.55%
- Bank of South India 55% p.a.
- IDBI Bank annual interest rate 7.90%
- Yes Bank annual interest rate 7.95%
- Bank of Karnataka 20% p.a.
- Federal Bank of India 25% p.a.
- Union Bank of India MCLR + 0.35% up
- RBI repo rate + 4.80%
- Lakshmi Vilas Bank RLLR + 0.75% up
Features and Benefits of Car Loans
Get financing for the purchase of new and used vehicles.
The financing amount can reach up to 85%-90% of the on-road price of the car. Some banks will finance up to 100% of the vehicle’s on-the-road value under certain conditions.
Loan terms can vary from one to seven years.
The loan amount can be up to three times the applicant’s annual income.
Some lenders offer instant auto financing.
If you choose to buy your car from a dealership or manufacturer that your bank has a relationship with, you may be able to get additional discounts and offers.
Cars purchased with financing will be held as collateral until the loan is repaid.
The most common repayment structure for car loans is the monthly installment (EMI).
Factors Affecting Auto Loans
Credit score
Your lender will ask about your credit score to see how creditworthy you are. Based on your report and score, the lender will ask you the loan amount and terms and conditions that they are willing to lend you.
Debt-to-income ratio
Lenders evaluate your income and the commitments you have to fulfill at the end of the month to see if a new car loan and its EMIs fit within your budget. Lenders will use the debt-to-income (DTI) ratio to determine your ability to obtain new and back-up loans. If your DTI score is higher, you will get a lower loan amount regardless of your income. There are strict risks with the terms of your loan.
Down payment
Every car loan comes with a defined security deposit. Deposit here means the amount you have to pay out of pocket or as a percentage of the price of the car on the road. While there are 100% financing loan programs in the market, they come with conditions.
to your advantage to save some money and use it as a down payment so you can borrow less and pay less interest to the bank, reducing the overall cost of car ownership. The lender also expects you to make a certain down payment from your end . This gives the lender an assurance that you are good at planning and managing your money and won’t suddenly abandon your repayments.
Car age
When it comes to used car loans, the age of the vehicle is very important in determining the interest rate; it is the deciding factor in accepting or rejecting a loan application.
Eligibility criteria
There are certain eligibility criteria that you should meet when applying for a car loan, and you must ensure that they have a proper understanding of this. Let’s take a look at the factors that will determine your eligibility to buy a car:
How to Become a Passenger Vehicle Driver
How to Become a Computer Programmer
Details Salaried self-employed
- Age 21 – 60 18 – 65
- Annual income of 25,000 Minimum turnover of Rs. 4 million
- Credit score 700700
- Loan term up to 7 years Up to 7 years
- Loan-to-value ratio up to 100% Up to 100%
Required documents
- Photo ID and proof of age
- Pan card
- Passport
- Driver’s license (mandatory)
- Signed application form
- Three passport size photos
- Proof of residence
- valid passport
- Voter ID
- driver’s license
- Postpaid utility bills (gas and electricity)
- Updated passbook or bank account statement
- Notarized registered tenancy agreement
- Bank statements for the past six months
Salaried individual
Salary slips for the last three months
Form 16 or income tax return
Self-employed
Balance sheet and income statement, with income calculations for the last two years.
Income Tax Return – Applicant’s last two years, 26AS, Traces
Business Proof
Certificate of registration, service tax registration, etc.
IT Assessment/Certificate of Licensing
Income Tax Checklist /TDS Certificate (Form 16A)/Form 26 AS (for income declared in ITR).
Car Loan EMI Calculator
Try the ClearTax Auto Loan EMI Calculator to find out the EMI you have to pay every month for a given loan amount. Simply enter field values such as the Principal Loan Amount (P), Loan Term (N) and Interest Rate® you are looking for to find the EMI you need to pay to close the loan.
What you should know
Here are some things we recommend you keep in mind before you apply for a car loan from your bank.
Do your research
Research the rates, fees, and other terms and conditions offered by various banks and lenders to get an idea of the market, then choose the lender with whom you will submit your auto loan application.
Small differences in interest rates and other terms can cause large differences over time.
Likewise, get quotes for your desired vehicle from various dealers. Also, some of these dealerships may have partnerships with banks and may offer the same vehicle at a discounted price. Contacting multiple dealers can help you find and get the best car deal.
Provide complete documentation
Once you’ve decided on a lender, you’ll visit their website, browse their website, and prepare the documents to submit with your loan application. Check the validity of your driver’s license and other documents, and renew if expiring soon.
Don’t give the lender any chance of delaying/denying the loan just because your documents are substandard.
Choose your repayment term wisely
Use our car loan EMI calculator to figure out the EMI you will have to pay for a given loan amount and repayment period. Using this tool, you will calculate the approximate loan term you are comfortable with and the EMIs you can handle each month.
With this assignment, you will be able to confidently negotiate loan repayment terms and EMIs with bank representatives. When you’re shopping for a car, don’t forget to consider the total cost of owning the car.
Longer tenures seem attractive from an EMI perspective, but cost more in interest payments.
Consider the total cost of owning a car
As mentioned earlier, total cost of ownership is an important factor when buying a car. But many do not see the big picture.
To calculate the total cost of owning a car, you must consider the applicable fees and charges, the nature of the fees and charges, interest rates, down payments, the total amount you will need to pay the bank from the outset until you fully pay off the debt, fuel costs , car insurance premiums, taxes paid and many other expenses.
Each bank may set different processing and documentation fees. Some lenders impose penalties if you wish to close your loan account before the loan term. All of these factors play an important role in choosing a lender.
Check deals and discounts
Most lenders offer festive deals and discounts during Indian festivals such as Dasala and Deepavali . Lenders or car dealers may offer discounts and concessions in many other situations.
Sometimes, there may also be a 0% financing plan. Keep an eye out for offers like these to save some money.
How to apply?
Car loans can be obtained in different ways.
Go directly to the bank branch.
Apply online through your bank’s internet/mobile banking portal.
Get financing through a car dealership.
Your chosen bank will collect your documents and initiate application processing, including checking your CIBIL score, asset (vehicle) value, eligibility criteria, etc., and then make a decision on your loan application based on the assessment results.
