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Car Loan Rates

In today's world, owning a car is not a luxury, but a necessity. Not having a car of your own restricts you and your family from living life to the fullest- going to work, outing for leisure or maintaining a good social and professional life. With growing number of institutions that offer vehicle loans, owning a car is no longer just a dream. Loanswala are available for new cars as well as used cars which enable you to buy your car and pay the borrowed amount through easy monthly EMIs.

Car Loan Interest Rate Additional Benefits

A loan is secured against the car itself. There is no need to mortgage any other asset to procure a loan. You get to use the car while paying for it in affordable and low installments. Low vehicle loan rates enable you to invest your surplus savings in alternate investments with high interest rates.

Car Loan Eligibility Calculator

This Loanswala car loan eligibility calculator uses your monthly income to estimate the amount of loan amount you will be eligible from banks. Important factors that determine your loan eligibility are: How much EMI can you comfortably pay every month while still meeting your household expenses? In case you pay any existing EMIs on other loans or pay house rent, the same will reduce your eligibility What is the loan tenure you would prefer and is available to you? Car finance is available for a period of 3 to 8 years. Loans are available for a longer tenure on new car as compared to used car. CIBIL Score - Good CIBIL Score indicates good repayment record. Bad CIBIL Score will result in either loan at higher interest rate or rejection of the loan application. For vehicle loans, the required CIBIL Score is at least 700. Your loan eligibility is also a function of interest rates of car. Higher car loan interest rates may reduce your loan eligibility with the same income levels as interest constitute a higher proportion of the EMI. You can calculate your eligibility with car loan calculator to know the amount you should apply for.

Lowest EMI for Car Finance

EMI is the amount that you pay every month to the bank or financial institution in order to repay your loan. EMI is composed of both principal amount and interest component. Interest component on your EMI is higher in early months and reduced with each EMI. Car Loan EMI Calculator helps you to calculate your monthly EMI at desired interest rate for a particular tenure. Car Loan EMI depends upon loan amount, interest rate and loan tenure

LOAN AMOUNT- If you apply for a high loan amount, then your EMI will be high

INTEREST RATE - Higher interest rate on your loan leads to high amount of EMI

LOAN TENURE - EMI reduces in case of high loan tenure

Car Loan Interest Rate Comparison

PROCESSING FEES-Most banks charge processing fees of Rs. 250 to up to Rs. 20,000. To get the lowest fee, comparison of vehicle loan rates, offers and cashback applying online through Loanswala.

INSURANCE PREMIUM- It is mandatory to take a car insurance policy to cover any damages to the car in case of an accident. However, the coverage and premium of various insurance policies can be different from each other. The insurance policy bundled with your car purchase might not necessarily be the best insurance policy. Hence, it is advisable to compare the insurance terms, before choosing an insurance policy for your car.

PREPAYMENT AND FORECLOSURE - When you want to repay a partial amount of loan before time, it is called part prepayment. In case you decide to pay the entire loan amount before time, it is called foreclosure. Banks typically levy prepayment or foreclosure charges in such situations and these can range from Nil to Upto 5%. So, check carefully if the low interest rate car loan you get comes with high prepayment or foreclosure charges. Note that some loans cannot be repaid before time.

DOWN PAYMENT- Banks offer car loan either at 80% of on-road price or 100% of ex-showroom price. However, 80% of on-road is almost equivalent to 95% of ex-showroom price. You are advised to fund maximum down payment as it reduces your burden of high monthly payments.

5 questions to ask your Car Loan agent

  • What is the loan amount eligibility based on your income and the car or SUV or MUV model you are planning to buy? Is the loan available on ex-showroom price or on the road price?
  • What is the EMI amount and loan tenure per Rs. 1 lakh loan amount?
  • What are the processing charges payable?
  • Can you make prepayment of the vehicle loan? If yes, are there are charges and restrictions on when and how much you can pay?
  • What is the interest rate? Is it a flat rate or reducing rate? Is the EMI payable in advance or at end of month?

    Schemes under Car Loan related to EMI and interest

  • EMI in arrears scheme - This is a standard method of paying EMI where the interest for a month (and principal repayment) is payable at or after the end of the month.
  • Advance EMI scheme- Under this scheme, you pay interest and EMI at the beginning of the month. So, each month, you pay interest on amount that you have already repaid to the bank at the beginning of the month.
  • Caution - In case your bank charges EMI in advance, the EMI amount should be about 1% lower than that in case of EMI in arrears. For those interested in more precise figures, EMI per Rs. 1 lakh loan amount on a 5 year car loan at 10% rate of interest as per EMI in arrears method comes to Rs. 2,125 while that as per EMI in advance method comes to Rs. 2,107.
  • Zero interest scheme- (also called 0% finance scheme) This is one of those free lunches scheme that actually doesn’t exist. So, beware of schemes that claim to offer zero interest. It is likely that the car company is offering a subvention scheme whereby the interest is paid by it to the bank upfront. Now, you could always ask the car dealer for the same amount as a cash discount. Its like padding up the price of the car for the interest amount and marketing it under a nice name.
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  • Flat rate of interest scheme In this method, you pay interest on the entire principal amount of loan till maturity. So, on a loan of Rs. 5 lakhs at 10% for 5 years, you would have to pay back a total of Rs. 5 lakhs plus interest of Rs. 50,000 a year, that is a sum total of Rs. 7,50,000. The EMI in this case would be Rs. 12,500.
  • Reducing balance scheme - In this method, you pay interest on the amount outstanding each month. With each EMI, the balance principal amount keeps reducing. So, on a Rs. 5 lakh loan at 10% for 5 years, you would have to pay back a total of Rs. 5 lakhs plus interest on reducing basis which comes to Rs. 1,37,411 or Rs. 6,37,411 including principal. The EMI in this case would be Rs. 10,624, a good 15% less than that for a flat rate scheme.

  • Caution-Never get hoodwinked with the low rate of interest offered on a flat rate scheme. A flat rate of 10% is equal to an interest rate of 18.7% on reducing rate basis on a 5 year car loan.

    Steps to take a car loan Credit Score

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  • Credit Score As is obvious, your credit score is very crucial in determining what rate you offered on your loan and whether you will even get the loan in the first place! Your credit score is based on your credit report of the past. It;s a good idea to know your credit score.
  • Review your Budget: Figure out how much you can realistically afford to pay each month as your loan EMI. Vehicle loans come in short to long tenures wherein longer the term is, lesser is your monthly payment. But a longer term means you owe more than the vehicle is worth for longer.
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  • Factor Insurance and other costs: Insurance costs and maintenance costs are not covered in your loan amount. It is, however, very important to decide on those funds. Consult with your insurance agent and the lender both, on how the total cost of insurance, maintenance and monthly EMI affect your budget.
  • Pre-Approval: It is advised to check with various different sources for the best deal for you. A pre-approval will work for you for a certain time period and for a certain amount of money. You can spend up to that pre-approved amount on your car. Even if you do not have a great credit score, you can still get the loan but for a higher interest rate. It should be take care of that the whole process in over in 14 days. Some credit scorers might penalize you for too many inquiries into your credit history.
  • Choosing Vehicle: Once pre-approved you can go ahead and choose a car of your dreams. One of the benefits of getting pre-approved is that you can focus on negotiating the best deal. The dealers may try to talk you into longer termed loans which will cost you more in the long run. In case of a used car, first confirm that the loan you apply covers the option of buying a car from a private party, generally, there are restrictions on the age of the used car and interest may be a little higher
  • Paperwork: Once the vehicle is chosen, price negotiated and the budget is decided, the lender would require your documents to finalize the sale. The add-ons such as extended warranty would be offered to you by the auto dealer. These must be carefully researched upon.

  • Paying off: After the sale, the payment schedule is informed to you. It is advised to have an account online so that you can check your balance and make payments with convenience.