A Detailed Guide to Vehicle Loan in India

As the name goes, a vehicle loan is a medium to finance your dream car or vehicle. While looking for such a loan, most people tend to go either for a personal loan or car loan. Both these types can be used to buy a car, but a vehicle loan is specifically for buying a vehicle. A personal loan can be taken to buy anything, however, the interest rates are high. Whereas, vehicle loan has a lower rate of interest and it is also easier to avail.

In a car loan, the vehicle acts as a security for the loan, which means the vehicle will be owned by the Bank and the ownership will be transferred to you when you complete the repayment.

TIP: Before picking a loan, it is highly recommended that you should compare loans from various lenders and pick the one that suits you the best.

Top Banks for Vehicle Loan 2024

There are various Indian banks Offering the best interest rates on a car loan.

Here’s the tabular form of car loan interest rates by major Indian banks-

Vehicle Loan Eligibility Criteria

• You must be between 18 years to 75 years of age.
• Individuals must have a monthly Income of Rs 20,000 plus.
• You must have completed 1 year of employment with your current employer.
• Applicants Individuals must be employed in some way it could be employed at a government Facility, at a private company or even self-employed.

Documents Required for Auto Loan

• You must provide an Identity proof it could be aadhaar card, Passport, Driving License, Voters ID or PAN Card.

• Individuals will also have to provide an address proof like Aadhaar card, Passport, Driving License, Ration Card, or Electricity bill.

• You would also need to provide proof of income, such as Form 16, Salary Slip, Latest Income Tax Returns, or Bank statements of last 6 months.

Benefits of Vehicle Loan

• In recent times, lenders have revised and customized their loan criteria for the flexibility and ease of customers.

• You can get easy loan approval with a high Credit Score. Credit scores play an important role in a loan approval. If your score is high, i.e., above 750+, then your loan will be easily approved. In case, if the credit score is low, then your loan will either be disapproved or you have to pay higher interest rates.

• Car loan lenders in India tend to have fixed interest rates so that you can pay a fixed amount every month.

• You can also buy used cars. It means that car loans are not just limited to new cars in the showroom, but also used ones.

Major Tips for Applying Auto Loan

Following tips will raise your chance of procuring loans so that you can buy the car of your wish-

• As said, keep your credit score high, normally a credit score higher than 750+ is ideal. You will get you a low-interest rates also the loan will be sanctioned easily.

• Lenders will want its customers to have a loan that they can pay on time. If you have other debts and you are opting for a new loan, then it will lower your chance of procuring a loan. You can better your Debt-To-Income Ratio by paying off your pending credit card debts and other loans.

• Always pay a great length of attention to the Terms & Conditions of the loan. Most often people get tricked with such loans and regret later. So first things first, read all the T&Cs very well. Take the help of a friend and ask them to read as well.

An Alternative to Loan- Invest in SIP!

Vehicle loan comes with a moderate or high interest rates with a long tenure. Instead of spending in EMI's invest in SIP - the best way to accomplish your Financial goals.

Speed-up your Savings to Buy a Vehicle

Planning to fulfil your dream? Checkout the sip calculator to get the precise price and investment per month

SIP calculator is a tool for investors to determine the expected return of the SIP investment. With the help of a SIP calculator, one can calculate the amount of investment and time period of Investing requires to reach one's financial goal.

Open SIP Calculator

Best SIP to Invest 2024

FAQs

1. Why should I take a vehicle loan?

A: If you are planning to purchase a car, it is better that you take a car loan instead of a personal loan, primarily because the rate of interest for a vehicle loan is much less compared to a personal loan. Moreover, you will not have to deplete your savings to purchase the car if you take a loan. Hence, it is considered a better financial decision to purchase a car with an auto loan instead of a personal loan or by taking money from your savings.

2. Is a credit score necessary to get an auto loan?

A: When you apply for a loan, the bank will evaluate your credit score, and the same is applicable in the case of an auto loan. It is better to have a credit score of above 750 to make it easier for you to get an auto loan.

3. What will happen if I have a low credit score?

A: Individuals with lower credit scores are also given auto loans, but they usually have to pay higher interest rates.

4. Do interest rates vary from bank to bank?

A: Yes, interest rates for auto loans vary from bank to bank. Moreover, the same bank offers auto loans at various interest rates depending upon credit score, income, and other applicant details. For example, Bank of Baroda offers auto loans at interest rates ranging from 8.4% to 11.5% p.a., whereas ICICI Bank offers auto loans at a fixed rate of 9% p.a.

5. Does income play an essential loan in car loans?

A: Yes, you must earn at least Rs.20,000 per month to be eligible for a car loan. Individuals earning below this will be deemed ineligible for car loans.

6. What are the documents required to apply for a car loan?

A: When you apply for a car loan, you will have to produce identity proof like a voter's ID card, PAN card or other similar identity proof. You will also have to produce an address proof like your mobile bill, Aadhar card, landline bill, and electricity bill or rental agreement. Finally, you will have to produce income proof like Form 16, income certificate, salary statement or bank statement of the past six months.

7. Are loans available for used cars?

A: Yes, individual banks offer loans for used cars as well. For example, Canara Bank offers low-interest loans for used and second-hand cars. Here the interest rate is fixed at 7.3% p.a, and the loan tenure is 84 months. The rate is lowered further in the case of women. The bank provides a payment of 90% of the price of the vehicle.

8. Is insurance offered as part of the loan?

A: All banks do not offer insurance or accidental insurance. However, if you take a car loan from Federal Bank, you will get Free personal accident insurance with the car loan. But the insurance rate starts at 8.5% p.a.