1. Who can avail of Car Loans?

• Salaried individuals in the age group of 21 to 60 years (at the end of the tenure)
• Self-employed individuals in the age group of 21 to 65 years (at the end of the tenure)
• Partnership Firms
• Public & Private Ltd. companies
• HUFs and Trusts

2. Which cars can be financed?

Most passenger cars and multi-utility vehicles manufactured by India’s leading automobile companies.

3. How do I calculate the amount of money I should borrow for my car/auto loan?

You need to calculate the amount of money required based on:

A. cost of the car based on make, model and colour.
B. amount and type of insurance cover you wish to opt for. (Only a few banks cover the insurance)
C. the kind of car accessories you wish to purchase for your car etc. (Please note that not all banks fund you for accessories).
D. Down payment for the car, which you will be paying upfront based on which you can calculate the remainder of the loan amount needed.
E. Percentage of financing available for the car depending on the make and model. This aspect varies according to the lender/bank’s discretion. Some banks offer up to 90% financing for new cars. A few other banks may offer loans for second hand cars as well and the amount of financing they are willing to offer again largely depends on the car’s resale value and differs across banks/lending institutions.

4. Can I get 100% financing for my car?

It is possible but not all banks offer such an option. Those banks which offer 100% financing will do so subject to certain terms and conditions and reserved only for certain makes and models of cars. These aspects are based on the discretion of the bank. Mostly this is applicable only for new cars.

5. What are the tenure options?

The choice is yours. The tenure will change from bank to bank and will also differ for new cars and used cars. The time frame for most car/auto loan repayments ranges from 1 year (12 months) to 5 years (60 months), a select few offer 7 year tenures as well.

6. How long will it take to process the loan?

Within 24-48 hours of completing documentation.

7. If I don’t have an account with the Bank, can I still avail of loans?

You need not necessarily have an account with the back to apply for a loan.

8. Do I need a guarantor?

Not really. But if your income does not meet the bank credit criteria, then you may be required to have a guarantor to stand surety for your loan.

9. What are the lending rates?

The lending rates vary on the basis of discounts,which are offered by manufacturers and dealers. Banks have a tie-up with most of the manufacturers and authorized dealers to be able to get a best deal.

10. When can I prepay the loan? Is part prepayment possible?

Most banks have a time frame or 6 months to a year only after which you can prepay the amount. Usually, in the case of a car loan part prepayments are not allowed, you can only prepay the remainder of the loan amount in full.

11. How do I repay the loan?

You can repay the loan by equated monthly installments (EMI).

12. What is an EMI?

EMI or Equated Monthly Installment is nothing but the amount arrived at by combining part principal and part interest to be repaid by you to the bank. At the end of the loan tenure this amount, which is constant throughout the loan repayment period will add up to the total principal and total interest respectively to be repaid to the bank. The EMI is always paid up to the bank or lender on a fixed date each month until the total amount due is paid up during the tenure.

13. Which mode do I use to repay the EMI?

There are quite a few options for you to repay the EMI. The normal practice is to provide your bank with post dated cheques (PDCs) for the entire repayment period at the time the loan is sanctioned. You can also make ECS (Electronic Clearing Service) payments, which will enable the bank to debit your bank account at a particular date every month towards your EMI payments. Another option is to take the installment directly from you salary where an agreement has to be made between the bank and the employer.

14. Is it possible to stall paying my EMIs by a few days?

Generally the EMI is always paid up to the bank or lender on a fixed date each month until the total amount due is paid up during the tenure. However in certain unavoidable circumstances, it is possible to delay your EMI payment by a few days but you need to keep the bank informed in advance. Also, the bank will in most cases levy a late payment fee for such delays.

15. What happens if I put off paying some of my EMIs?

Adhering to such practices will cause a dent in your credit score. Frequent and continuous late payments will result in a default. This will make borrowing in the future a difficult task and even if future loans are sanctioned it may be given only at high interest rates owing to your dented credit score. Also, you need to factor in the compounding late payment charges which may add up to a significant sum. Another serious aspect is the fact that if these pending dues mount, your car can be seized without further ado, adding to the list of disadvantages of such a practice, which is best avoided.

16. Is the interest charged/calculated?

Based on the bank the Interest is calculated on a monthly reducing balance or an annual reducing balance basis.

17. Who can be the co-applicants for the loan?

Your spouse or any blood relative staying in the same residence can be a co-applicant.

18. What security/collateral do I have to provide?

No additional security/collateral has to be provided apart from the car against which the loan is granted.

19. If I do not meet all the criteria for the loan, can I still avail of a loan?

Yes, it is possible for you to avail of a loan even if you do not meet all the criteria, at the discretion of Bank.

20. What is a Monthly Reducing Balance?

In the case of monthly reducing balance method, the principal gets reduced at the end of every month and the interest is calculated on the outstanding principal at the end of the month.

21. What is an Annual Reducing Balance?

In the case of annual reducing balance method, the principal gets reduced at the end of the year and the interest is calculated on the outstanding principal at the end of the year.

22. What are the stages involved in availing a loan?

The stages involved are:

• Application
• Processing
• Documentation
• Sanctioning of the loan
• Disbursement

It is explained as follows:

Car Loan: Application Process

Once you have zeroed in on the car that you want to purchase, the next step is to apply for a car loan. There is a lot less paperwork involved than a home loan since the bank does not have to verify any asset as in the case of home loans. It takes about three to six days for you to get a car loan -a lot less time than a home loan. Here is a step-by-step break-up of the car loan application process:

Step 1:
Enquiry with a lender: The first step is to get in touch with a lender. You need to get in touch with as many lenders as possible and get them to make loan offers to you. Then negotiate with them to get the best interest rate. Check if there are any special offers. After you have got all the banks to make their offers to you, select your lender based on the information you have in front of you.

Step 2:
Documents Collection After you finalize your lender, the lender’s direct selling agent will visit you and collect documents supporting proof of income, residence proof, and identity. You may be required to produce copies of IT returns, salary slips, bank statements, passport, driving license, and other relevant documents. These requirements vary from lender to lender.

Step 3:
Field Investigation Agency Representative Visit After submitting the documents, a field investigator will visit your home to double check the facts provided in the documents, such as your place of residence, tenure at work place, and so on. It is essential that you are present during this visit to clarify any query that the investigator might have. Otherwise, the investigator might not get all the facts clearly and could report that the facts you provided do not actually add up – thus forcing the lender to reject your loan application.

Step 4:
Loan approved Once the lender is satisfied with the veracity of your documents, the loan is approved. The lender then disburses the amount through cheques or demand drafts (DD).

23. Does the Bank have a loan for the car I want?

Car Loans are available for almost all new passenger cars.

24. If I am not able to furnish my income documents is there a special scheme for persons like me?

Yes Banks have tailor made schemes for persons like you. Some banks also fund without the income proof.

25. Can I negotiate with my bank for interest rates?

It is possible to reduce interest rates based on negotiation with the bank.

26. Can I opt to sell my car before my loan repayment ends?

This is not possible as you have pledged your car as security for the loan. If you must do so to perhaps close the loan early, then you will need to obtain an NOC (No Objection Certificate) from the bank.

27. In the unfortunate event of a car accident what happens?

The insurance company needs to be notified of the accident. Once a surveyor does an assessment of the damages to the car the claim is processed. If you have been very regular with your payments the bank normally provides and NOC to you, where by the insurance company makes a payment in your favour else it happens in the bank’s name. In the event of a complete loss the insurance amount is paid directly to the bank and a settlement is made to you depending on the loan amount you have repaid during that time frame.

28. Will my loan finance my insurance and registration charges as well?

Only very few banks finance these aspects. Usually the ex-showroom price is considered for the loan amount and not the on-road price that includes insurance and registration charges.

29. What happens after I complete the repayment of my loan?

When the last EMI has been paid the bank’s legal claim to the car ceases to exist. The bank will issue Form 35 with an NOC to the RTO canceling the bank’s name from the RC book. The same process is followed for your insurance policy as well.

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