1) What is a Car Loan?

• A car loan is an amount of money borrowed from a bank or a lender to purchase a car (Vehicle) by paying interest for the borrowed money and repaying the loan over a particular period with monthly payments.  A car loan is a secured type of loan in which the amount borrowed to purchase the car, acts as the collateral for the loan and can acquire the ownership of the car by the end of the loan tenure.

2) Car loan is also referred to as?

• A car loan can also be referred to as Auto Loan or Automobile Loan, here auto is referred to as the vehicle for which the loan is borrowed. A car loan is also a type of Financing, Car Financing is the term. Car finance is nothing but allows the borrower to obtain various aspects required for a car loan or car leases.

3) What are the types of car loans?

• There are mainly three types of car loans. They are :
• New Car Loan: The name itself says, a loan is acquired to get a new car right out of the showroom. The interest rates of new car loans can be from 9 to 14% and have a tenure of 1 to 7 years period.
• Used Car Loan: This car loan is requested for a car that is already used by an individual and selling to the applicant. For this kind of car loan, some measures need to be taken care of like, the used car should be of less than 5 years old and not more than 10 years during the time of loan maturity. The interest rate for a used car loan is of 12 to 18% and the tenure from 1 to 5 years.
• Loan Against Car: In this scenario, the car of the applicant is served as collateral for the loan borrowed, when the applicants need urgent funds. The interest rates for this kind of loan is 14 to 15% and the tenure of 1 to 3 years.

4) Which type of car loan should I prefer?

• Depends on the applicant’s choice, the type of car loan can be obtained. Whether the applicant wants a new car or an old used car for practicing or a car to get a loan for money. It is the applicant’s choice of what type of car loan they can get.

5) Is there any limit on car loans, like having more than one car loan?

• There is no limit on car loans, one can have more than two or more car loans. The car loans will be issued based on the applicant’s credit score and past payments of the loans on time and the income of the applicant and other factors that are required to acquire a new car loan.

6) What are the documents required for a car loan?

• The documents required for a car loan are:
• Applicant’s identity card saying, Aadhar card or passport or PAN card or Voter id.
• Applicant’s address proof saying, Aadhar or PAN or Passport.
• Applicant’s driving license
• Applicant’s Income proof, for salaried past 6 months salary slips and self-employed past year ITR, Account statements, balance sheet, and profit and loss accounts.
• Applicants sign and age verification proof saying, birth certificate, passport, voter id, bankers statement.
• Some Additional Documents.
• The documents of car loans vary from one bank to another and from one lender to another.

7) What is the eligibility for a car loan?

• The eligibility for a car loan is, the applicant’s age should be in between 21 to 65 years. The applicant should have at least 2 years of work experience with an income of 2 lac per year.  A good credit score will help the applicant a faster and secure loan.

8) Can I negotiate the interest rates of the car loan?

• A car loan can be negotiable when the applicants have a good credit score and have a good relationship with the lender or the bank and have the income higher. The applicant can negotiate for a lower interest rate on the late, but it depends on the bank or lender to accept the negotiate request.

9) What happens, when I don’t pay my EMI’s of a car loan?

• If there is an irregularity in paying the EMI’s of the car loan for the past two or three times, then the car will be seized by the lender or bank and a higher interest rate has to be paid to acquire the ownership of the car.

10) What is the interest rate of a car loan, fixed, or floating?

• A car loan interest rate is mostly a fixed rate. Some banks and lenders and financial services allow the applicant for floating interest rates. Usually, the fixed interest rates are higher than the floating rates. If floating rates are chosen for the car loan, depending on the market interest rates the interest has to be paid for the bank and the market interest rates are fluctuating from time to time.

11) What are the advantages of having a car loan?

• There are many advantages of having a car loan like, when the loan payment is done the applicant has full ownership of the car, great credit score, no collateral required for the loan, there are no limits on how the applicants use the car or how many miles drove, can choose the payment methods according to the needs of the applicant, can negotiate the interest rates, and can always get a car at the end of tenure.

12) what happens when I do a pre-payment of my car loan?

• Some banks or lenders will ask for a penalty fee for pre-payment of car loans as the interest. Applicants need to read the terms and conditions of the bank or lender before prepaying off the loan.