A car loan is a borrowing instrument that a lender such as a bank or NBFC (non-banking financial company) provides an individual allowing him/her to purchase a used car. Car loans have gained popularity in recent times as instead of being a luxury item or a symbol of status, cars have grown to become an essential commodity for the continuously growing middle class of India. With the increased popularity of car loans, most banks and NBFCs currently offer this type of loan to individuals who have a good credit history.

Yes, car loan is offered for pre-used cars. But, the interest rate for such a loan would differ from that of a new car. However, the loan would only cover the price of the car itself, other costs as transfer of registration, etc. will have to be borne by you.

Just as the name suggests, a car loan is a loan granted to an individual interested in buying a car. Therefore a car loan is a secured loan where the car you buy acts as a collateral. Therefore, there is no additional collateral requirement for a car loan. However, you do have to get the RC (registration certificate) of the car endorsed with the bank. This endorsement is cancelled after repayment of the loan is completed.

When you input your basic details into the Finance Seva.com car loan eligibility tool, we provide you with all available options based on the information you provide us. After you get the complete list of lenders who might suit your specific requirement you can compare the various loan options based on tenure, interest rate, maximum loan amount as well as other factors.

In case of a fixed rate car loan, the rate of interest applicable on the car loan remains the same over a period of time. Therefore fixed rate car loans have a specific EMI payout requirement that does not change due to market conditions. In case of a floating rate car loan, the applicable interest rate of the car loan varies periodically as per the decision of the lender. Thus the payable EMI on a floating rate loan may change from time to time.

As per the RBI directive, from April 2016 onwards, banks are using MCLR (marginal cost of lending rate) to fix the interest rate on various loans including car loans. Currently the MCLR-based car loan rates are slightly lower than the base rate method that banks used earlier. However, changes in CRR, margin, bank operating expenses and deposit interest rates will change the MCLR and by extension the interest rates offered on car loans. Moreover, as per new regulations, banks are required to revise their loan interest rates after every six months.

Pre-payment of car loans is allowed by many lenders however there are usually a few terms and conditions attached. For starters, the lenders only allow car loan repayment after you have completed specified loan tenure and there is usually a pre-payment penalty as well. The prepayment penalty charges usually range from 1%-4% of the. It is recommended that you confirm all relevant charges with a bank before you make a pre-payment.

Repayment of loan can be done through post dated cheques (PDC) provided by you to your lender when signing up for the car loan. The other option is an auto debit facility where the EMI is automatically debited from your savings account after you have provided an ECS (Electronic Clearing Service) mandate to the lender. 

Generally, banks treat you as a defaulter if you fail to pay two or more EMIs in a timely manner. You will initially be charged a penalty fee and asked to regularise your payments. If you fail to regularise your payments after repeated notifications, the financial institution can legally repossess your vehicle. Subsequently, your credit score will also take a hit and in the future, you will face complications in future loan approvals.

Once you have paid off your loan in full, the bank issues Form 35 & NOC (No Objection Certificate) to the RTO (Road Transport Office) and the lender’s name will get removed from the RC book endorsement.

Zero percent financing is an offer provided by a few automobile manufacturers in collaboration with the lender. Under this plan, the automobile manufacturer is responsible for paying back the interest on the car loan to the financier instead of the borrower.

As the manufacturer is liable to pay the interest component of the car loan, the manufacturer would have to maintain a higher profit margin on the sale. That is the reason why, the cost of zero financing car models is usually greater than the cost of car models that do not have this feature.     

Car loans are provided by most traditional banks including HDFC Bank, SBI, ICICI Bank, Union Bank, Kotak Bank, Axis Bank and many others. You can easily apply for a car loan with these as well as many others banks through Finance Seva.