I wanted to buy Mahindra Reva car. When I inquired with a few banks for car loan, they said that I’m eligible a loan of Rs. 4 lakh. Whereas the car costs around 6.5 lakh. What is the procedure or is there any way I could get a loan for the entire amount? Also please suggest which is a better bank to obtain a car loan.
With the rise in interest rate and increasing NPA, banks are getting reluctant to provide auto loans unless there is ample security in hand. While opting for a car loan, it is important to assess how much loan you can actually avail based on your income and credit score. Normally banks allow loan up to 75 to 95% of the cars on road price and rest you need to contribute. Also, while calculating maximum loan that can be offered to you, banks check your income. Usually up to 48 times of net monthly income or 4 times of net annual income is allowed as ceiling amount for a car loan. As you have mentioned that “Reva” is costing around Rs 6.5 Lac and bank is allowing only Rs 4 Lac, so you can check with some more banks for a better offer. You can try HDFC and ICICI for a quick processing and also check SBI for lower interest rate.
If other banks also offers a lower loan amount than you can opt to include a co borrower for increasing the ceiling loan amount. Some car companies have tie-up with particular banks for easy loan to its customers. You can check the same with Car Company also if they have tie up for close to 100% loan.
The eligibility criteria for a Car Loan might vary from one lender to another. You need to choose the one that suits you the best. The financial branches of some automobile companies, like Tata, offer loans if you buy their cars. But, in case you plan to buy some other make, you’ll have to consider visiting all the leading banks around.
To make things easier, here is the eligibility criteria for a Car Loan:
Age: 18-75 years
Income: Above Rs 10,000 per month
Employment: Total work experience must be > 3 years and > 2 years in the current position/business/profession
Model of the car: Only the approved models are eligible for a loan
Other factors include your residential area and stability of your stay at the current residence
Your loan amount directly depends on your savings and how much you can pay as down payment. It’s advisable to make a heavy initial payment instead of borrowing a huge amount. Why? Because it can significantly reduce your financial burden in the future and give you enough time, energy and resources to focus on other essentials of your financial security like a house, your retirement planning, building an emergency fund etc. Now’s when all your savings can come to your rescue. They can save you from the wrath of a long-term loan and tons of EMIs. Other important factors that decide your loan amount are the car model you’re aiming for and whether you’re going for a new or a used car.
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