We have witnessed a significant change in the way we travel after the outbreak of Covid-19 due to safety concerns. More private means of travelling are being adopted to maintain social distancing as a precautionary measure. It has also enabled an increase in the demand for cars on the road. While those who own a private vehicle are making its use, those who don’t own one are looking to buy it. However, not everybody is financially sound enough to buy a car instantly, especially during a pandemic. A car loan can come handy at such a situation without damaging your overall monthly expenses.
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You should do comprehensive research before taking a car loan to find the best possible options that suit your needs. You can consider the following points while opting for a car loan.
Features of Car Loan
- Eligibility Criteria
Usually, before banks issue a car loan, they have specific eligibility criteria that you must meet. This may differ for all banks. It encompasses your age, salary or self-employment status, credit score, annual income, and similar other details.
- Application Process
You can avail car loans either by visiting your bank’s branch or by applying online. The bank’s representative will collect your documents and initiate the loan process. It involves the consideration of your credit score, the current value of your desired vehicle, its depreciating value, interest rates, and similar factors. If you choose the online method, you can fill in the required details on the website and proceed with it.
- Interest Rate
All banks offer different interest rates for car loans. It is vital to research and choose the most suitable deal. The interest rate charged to your application depends upon the loan amount disbursed, credit score, and loan tenure. Also, if you have a prior relationship with the bank in terms of existing accounts, it can affect your charged interest rate.
- Loan Tenure
Usually, the average loan tenure for new cars offered by banks is of seven years. You should note that longer loan tenure decreases your individual EMI payments. However, it increases your complete payout over the entire period, as you end up paying more interest on the principal amount.
- Additional Charges
Apart from the principal amount and interest rate, additional charges must be considered. It includes processing fees, documentation costs, and foreclosure charges. You must compare different banks to analyze and get the most affordable deal on car loans.
Benefits of Car Loans
- Car as Collateral
A significant advantage of car loans is that it doesn’t require any collateral to avail the loan. The vehicle itself acts as a security with the bank. Thus, in the event of a default, it is only the car that will be repossessed by the bank and not any other asset.
- Flexibility to Choose the Payment Mode
Many banks allow you to pay your EMIs through post-dated cheques. Otherwise, they also allow you to use the auto-debit facility where the EMI gets automatically deducted from your linked bank account.
- Customized EMI
After reaching an agreement on the car loan, you can decide the monthly payout. It will allow you not to overspend or adjust elsewhere. Many banks offer a customized EMI policy.
- Dealership Benefits
Usually, banks have tie-ups with car dealerships. It will provide you with a great deal on a new car through discounts on the price. You can also get freebies including accessories, insurance and registration charges.
- Complete Ownership
Unlike the lease scheme, the car loan lets you be the absolute owner of the vehicle. And, it enables you to undertake any modifications required to suit your taste. It allows unlimited usage of the car, which is not necessarily allowed under the lease scheme.
These pointers mentioned above will enable you to make the right decision of opting for a car loan. If you are still unsure, you can research online and check the various deals offered by numerous banks. You can always choose a reliable bank like Axis Bank, which provides multiple car loan deals. The advantages include loan tenure of eight years for new car loans and a return of interest, starting at 9.25 % per annum.