Car Loan Simplified

Both buying a car with bank loan and leasing a car have their own benefits, the key is determining which of those benefits matter the most to you. The benefits of buying a car with loan are - Ownership of car after paying the loan, unlimited mileage, lower cost incase of owning the car for a longer term period of over 5 years & flexibility to sell your car at any time. The benefits car leasing are - Zero down payment, fixed monthly rental incl. insurance & service plus tax savings.

A typical car loan tenure is between 24 -84 months. The shorter the tenure, the higher is the monthly installment.

The maximum loan amount approved may vary from one bank to the other. Usually, most banks approve loan amounts that range from 80%–90% of the car’s ex-showroom price. Some banks even lend 100% of the car’s ex-showroom price. The percentage of the loan offered depends on the price, type of car (standard/ premium), your income profile and CIBIL score. Generally, the banks tend to approve car loan with EMI upto 40% of your monthly income.

You cannot enter a transaction with any seller without a 'No Objection Certificate' (NOC) from the Bank. The NOC can only be obtained after a foreclosure or after you have paid off your loan. It is advisable to check the rules and regulations associated with the foreclosure with the respective bank.

Although each bank has specific documentary requirement, the basic KYC documents include - Address Proof (such as Passport / Aadhar Card / Telephone Bill / Rent Agreement / Property Registration Papers), Income Proof (Salary Slip, Form 16 /Income Tax Returns, Bank Statement or Profit & Loss A/c & Balance Sheet for Self Employed/Company Finance), ID Proof (such as PAN Card / Aadhar Card / Driving License). Specific eligibility criteria depends on the loan amount, applicant profile & CIBIL score.

Once the bank receives a completed loan application along with necessary KYC documents like address proof, income proof and identity proof, the following steps take place - 1. Verification of the Document, 2. Approval of Application, 3. Sanctioning of Loan, 4. Disbursement of Car Loan.

It can take anywhere between 48 hours to 15 days once all the documents have been received. If all the document are valid and the bank find the applicant to be capable of paying the EMIs on time or have a pre-approved loan from the bank, they will approve the car loan quickly.

While comparing the car loan offers from various banks, it is important to consider the interest rate, one time processing fees, prepayment / foreclosure charges, loan amount based on the eligibility along with the tenure, down-payment & monthly EMI. Incase you are an existing customer of a bank, you may be also be eligible for special car loan offers with reduced interest rate or no additional charges and instant loan approval.