Car Loans are one of the best ways to fund your car purchase. All public sector banks as well as private banks offer Car Loans for purchase of new and old cars. Car Loans are quite simple to avail for new cars as well as used cars.
Car overdraft loans are Car Loans with an overdraft facility. In simple terms, in this overdraft facility, the loan account is linked with an overdraft account, just like any other OD. While calculating the interest component, the overdraft or OD account will be deducted from the principal outstanding on a daily basis.
The biggest advantage of a Car Loan with overdraft facility is that the interest is calculated on the effective due amount and not the entire amount. This effectively results in far lower repayments as compared to a normal Car Loan. The amount placed in the overdraft loan account can be used as per the financial needs of the borrower. There is no cap on the LTV and the borrower can avail up to 100% of the value of the car, if he or she has the required eligibility in their OD account.
On the downside, a Car Loan with an overdraft facility is not available with all banks. Only certain banks offer such a facility for Car Loans. The second drawback is that such a Car Loan is usually made available for borrowers seeking more than a threshold limit, which is generally fixed at Rs. 7 lakhs.
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