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Car loan is famous all the borrowers and it stand next only to the Home loan in terms of popularity. This being an aspirational aspect of the people to own a car of dreams that can be driven with the family, borrowers like to buy a car even before they buy a house.

Banks are very liberal for Car loans as long as the Borrower is having steady income source.

Eligibility :

Generally, individual(s) with steady source of income including persons engaged in agriculture and allied activities, who are 18 years of age are eligible for housing loan.

Purpose :

The sole purpose of a car loan is to buy a motor vehicle. Mostly new vehicles are financed by the Banks but now since the preowned cars market is also becoming popular hence old and pre-owned cars are also getting financed by the Banks.

Maximum Amount :

Maximum loan amount is calculated on the basis of two broad factors namely the price/value of the car and secondly on the repaying capability of the borrower. The repaying capacity of the borrower is arrived at by finding out the ratio of EMI/NMI.
EMI= Equated Monthly Instalment
NMI= Net Monthly Income

Banks do sanction on road price of the car and it depends from Bank to Bank.

Security :

In cases of car loan, the car, which is financed, itself renders to be a good security for the Banks and hence many a times Banks do not insist for any further security.
Sometimes Banks can ask for additional Guarantors looking at the high value ticket loans.
The car gets hypothecated to the Bank till the loan is repaid.

Frequently Asked Questions :

Can I buy an old car by taking a car loan?
Yes, you can apply for a car loan to buy an old car. Some of the banks do allow the old cars to be bought.
Any security or collateral required for the car loan?
No further security or collateral is required for a car loan as the car itself is a good security (primary security) with the bank. The car gets hypothecated to the Banks till the complete repayment of the loan.
What is the maximum loan amount allowed by the Banks?
The Banks may finance up to 90% of the on-road price of the car. Depending on the make of the car it can even go higher.
Is there any tax benefit in car loan?
No, there is no tax benefits for car loans as of now. In some cases of electrical vehicle government do provides some kind of subsidy but Banks have no role in that.
Can I pre-close my auto loan?
Yes, absolutely. All the Banks allow the borrowers to close the loan account by paying a small amount as pre-closure penalty.
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