Auto Loans

Auto Loans

India is witnessing a surge in sales in the automotive sector. The sales figures of all the leading two wheeler and four wheeler manufacturers are booking a phenomenal rise; this increase in the demand of automotive can be attributed to the ease of availability of automobile loans by various banks. Banks are offering these loans to its customers at attractive rates to increase the consumer base; banks are funding the purchase of new vehicles and refinancing the old ones too. Car loans is the fastest increasing segment in the auto loans category. Automobile required for commercial purpose are also financed by banks at lower rates. Private sector banks are moving ahead of the their public sector counterparts due to better service.

There has been a growing trend of getting purchase of automotives financed. According to a research, as much as 75% of the vehicles purchased in the last decade were financed/ purchased through auto loans. Two wheelers, cars, commercial vehicles are increasingly being purchased on loans. Banks and various non-banking finance companies are cashing on this trend by offering attractive automotive loans. Major automotive manufacturers are tying up with banks for providing auto loans. Easy finance schemes have pushed the auto sales further.

Maximum loan offered by Banks for Auto Loans:

In case of new vehicles, banks generally finance up to a maximum of 90% of the cost of the vehicle.
In case of old/second hand vehicles, banks finance up to a maximum of 85% of the value of the vehicle. Repayment is done by Equated Monthly Installments or EMI.

Interest Charged by Bank on Auto Loans:

Although Public sector banks are offering lower interest rate than their private counterparts but they are lagging behind due to poor quality of service. Interest rates depend on the automotive model, loan tenure. Interest is generally calculated on a monthly reducing balance.

Process Of Auto Loans Application:

Customers can contact the bank representative and apply for an auto loans. They can also fill online forms. There is no processing fee for new cars in most banks/finance companies. However, some companies do charge a minimal processing fee for used automotives.

Documents Required for Auto Loans:

1. Application Form
2. Photographs
3. Proof of income of last two years
4. Proof of Residence
5. In case of public/Private companies, a certifies copy of MOA and AOA.

List of Some of Banks Offering Auto Loans:

Bank of India - BOI Star Autofin Scheme

State Bank of India - SBI Car Loans

Standard Chartered - Auto Overdraft

HDFC Bank - Fast Track Schemes

United Bank of India - United Car Loan Scheme

ICICI Bank - Financier For Auto Loans

Andhra Bank - "VANITHA VAHAN" Loan scheme

Documentation For Auto Loan

Before You Get an Auto Loan

It’s always a delight to get the keys to a new car. For most, the only challenge is paying for the car. Unless you have cash in hand, you’ll need some type of auto loan. Follow these six keys to a great auto loan and you can ride around knowing you got the best deal.

Key to a Great Auto Loan #1: Manage Your Credit

One of the first things you should do before applying for an auto loan is review your credit. Find out if there’s anything you need to fix. Any errors or bad habits could affect your auto loan rate.

Key to a Great Auto Loan #2: Know How Much You Can Spend

Diligent budgeters already know this, but I don’t run into very many diligent budgeters. Track your budget any way you like (Microsoft Money is a good tool or build your own system), and then find out how much your payments might be with the car payment calculator.

Key to a Great Auto Loan #3: Look at the Big Picture

The terms of your auto loan will determine how much you pay now and how much the auto loan costs overall. Remember that a low cost now may not mean low total costs for you in the big picture.

For example, most borrowers choose a low down payment because it’s easy to manage today. However, that choice increases the total cost of your auto loan and usually leaves you ‘upside-down’ (meaning you owe more on the vehicle than it’s worth) for years to come.

Key to a Great Auto Loan #4: Consider Insurance

When you ask various lenders what they’ll offer you, you may find that you need insurance to get the best auto loans. I’m referring to disability insurance and life insurance at this point. The lender is concerned that something could happen to you and you wouldn’t be able to pay them back.

Having insurance might not be a requirement, however you should know all the details if you already are insured.

Key to a Great Auto Loan #5: Shop Around

This is simple but it is often overlooked. The most important point here is that you don’t have to get your auto loan from the dealership. I strongly encourage you to check with a credit union, bank, or online lender. In most cases your car dealer won’t have the best auto loan. By consulting with an alternate lender before stepping onto the lot, you’ll be armed with knowledge of what’s fair -- and you may have some bargaining power.

Key to a Great Auto Loan #6: Avoid Prepayment Penalties

Things change in life and flexibility is important. Your auto loan should also be flexible. Find a lender that will allow you to make extra payments or pay off the loan entirely without any penalties. It’s important to read the fine print – some penalties aren’t called “penalties”.