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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Before you apply for a car loan, take in consideration the following points:
How Much Can You Afford:
If you’re constricting your budget, you may want to spend even less. Used cars will need a little extra attention from time to time for changing the old tires, maintenance and other ownership costs such as fuel and insurance. So if you’re looking to save money, consider more than one brand. We suggest making a list of three cars that meet your needs and fall within your budget which will help you in applying for car loan.
Check the Vehicle history report:
Plan to get a vehicle history report unless you’re buying it from a close friend or family member who can guarantee for its history. This is an essential early step. If the car you’re looking at has a bad history report, the sooner you know the better.
Contact the Seller:
Once you find a good prospective car, call the seller and verify the information about the You can ask private-party sellers why they’re parting with a car, or whether it has any mechanical problems. A phone call is the best way to ensure the car is still in stock if you’re buying from a dealership. Sometimes the seller will mention something that wasn’t in the ad that might change your decision to buy the car.
Have the Car Inspected:
Test-driving a used car is the best way to know if this is the right car make and model for you. If you like the car, consider having it inspected by a mechanic before you buy it.
A private-party seller will probably allow you to do this without much resistance. Most dealerships will let you borrow a car to take to be inspected by an outside mechanic.
Negotiate a Good Deal & Get the Paperwork Done:
If you are reasonable and have a plan, chances are you can make a deal pretty quickly and easily. Make a deal where you and the seller arrive at a price that sounds good to you and is near the average price paid,
If you are at a dealership, you’ll sign the contract in the finance and insurance office. There, you will likely be offered additional items, such as a warranty, anti-theft devices, prepaid service plans or fabric protection.
If you are buying a car from an individual owner, make sure the seller properly transfers the title and registration to you. It’s important to close the deal correctly to avoid after-sale difficulties.