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What is a Car Loan ?
A Car loan is a loan that person takes out in order to purchase a Car. Car loans are typically structured as installment loans and are secured by the value of vehicle being purchased.
Benefits of Getting a Car Loan
You may be tempted to purchase a used vehicle simply to avoid having to take out a loan. But in the long run, this isn’t always the most cost effective option. Used cars tend to break down more often, sometimes requiring costly repairs. When you finance a new car, you get the peace of mind that you won’t have to pay for those repairs for quite some time. Not to mention, many newer cars are more fuel efficient, meaning you spend less at the gas pump.
To get a car loan, you technically don’t need any collateral. This is because your car will automatically serve as the collateral for the loan. Failure to pay your outstanding balance will lead to the lender seizing your car.
Even if you have poor credit, you’re likely still able to obtain an auto loan. The great thing about car payments is that they actually help your credit history, as long as you stay on top of payment deadlines.
Nowadays, car finance options are usually accompanied by bonuses. Auto loan financiers usually give added perks such as free road tax, free servicing, and free fuel. These bonuses are not usually the best reason to take loans, but they definitely don’t hurt!
When you reach an agreement on your car loan, you get to decide how much money you pay each month. This means you won’t be overspending or having to make adjustments elsewhere in your life. With a reasonable car loan, you could even have enough money left over to start saving for your next new car.
In conclusion, it is advisable to use car finance options even if you have enough money in the bank. The money in the bank can be used for other purchases or emergencies.
Different types of car loans
As explained earlier, if you are planning to purchase a brand new car from a showroom, you are eligible for a New Car Loan from a bank or lender. If you are eyeing a brand new car but do not have sufficient funds in your pocket to make the purchase, banks or lenders will come to your rescue.
If you have set your eye on a pre owned car and want to purchase it, banks and financial institutions will help you make the purchase. With Used Car Loan, you may get up to 90 percent of the car’s valuation as loan. Funding is available for purchase of cars which are not older than five years The rate of interest charged on purchase of pre owned cars is slightly higher than loan on new cars. Banks and lenders charge anywhere between 8 to 16 percent per annum for Used Car Loans. You can repay the loan within a period of up to eight years. At the time of maturity of the loan, the car must be younger than 10 years.
You can avail quick funds at a time of need using a loan against your car. If you are eligible for such a loan, the loan amount is transferred to your account almost instantly. What you are doing is turning your existing car a collateral to gather funds to purchase a new car or for an emergency.
These loans against car are available in banks and financial institutions across the country. Loans are available up to Rs10 lakh or 100 per cent of the value of the car. The rate of interest on such loans is considerably higher than other car loans. Banks charge an interest of 14 to 15 per cent per annum.