Now‑a‑days, almost all commercial banks extend term loans
for purchasing cars of nearly all 'makes'. However, each bank has its own loan
scheme and therefore, details thereof must be obtained before dealing with a
particular bank. The salient features of car‑financing scheme, in
general, are stated below.
Eligibility: 1. Permanent employees of reputed establishments.
2. Professionals and self‑employed
who are assessed to income‑tax.
3. Persons engaged in agriculture
and allied activities.
Purpose
of:: 1. For
purchasing new car, jeep or multi‑utility vehicles of any make.
Advance 2. Second‑hand cars
may also be financed provided the vehicle is not more than 4 years old.
Quantum of
Loan :Normally a maximum of Rs. 12 lacs for new vehicles and Rs. 8 lacs for
old vehicles. A loan maximum of 2 times
of the net annual income is normally sanctioned. Income of spouse can also be
considered.
Margin :1 New Vehicles ‑
10‑15% for loans up to Rs. 4 lacs
‑
15‑20% for loans exceeding Rs. 4 lacs
2. Old Vehicles ‑
20‑30% for vehicles up to 2 years old
‑
30‑40% for vehicles 2‑4 years old
Interest
:
Banks are free to charge any rate of interest.
Security In
addition to hypothecation of car, suitable co‑obligant/guarantor is
insisted upon. Some times, approved securities with sufficient margin may also
be pledged.
Guarantee of the spouse
if his/her income has been considered for eligibility.
Repayment
of Principal
amount along with interest is required to be repaid within a maximum period of
7 years in
Loan equated
monthly instalments (EMIs). In case of old vehicles the maximum repayment
period is normally restricted to 5 years for vehicles up to 2 years old and to
3 years for vehicles which are 2‑4 years old. No repayment holiday is
considered and the repayment starts immediately from the following month of
disbursement.
Processing No processing charges are
normally charged these days.
Documentation
Following documents are normally required to be submitted
along with completed application form
(i) Bank statement for the last 6 months,
(ii) Two passport size photographs.
(iii) In case of salaried persons, latest salary
slip (in Form 16),
(iv) In case of self‑employed individuals and professionals, Income‑tax returns for the last two financial years. Besides, in case the borrower is not an existing bank customer, proof of identity and residence shall also be required.
Other
Terms 1. Loan amount is directly released to
the dealer along and Conditions with margin money.
2. In case of old cars,
besides automobile engineer's certificate, original invoice of the dealer is
also insisted upon.
3. Comprehensive insurance of the car
financed by bank.
4. In
case of salaried persons, salary must be credited with the bank branch
arranging loan otherwise mandate from the employer for repayment of instalments
shall be obtained.
5. Salary
Certificate/Income Tax Returns/details of assets and liabilities of borrower
and guarantor/usual loan application form are obtained before sanction of loan.
Equated Monthly Instalment (EMI)
The amount of EMI shall depend upon the loan amount, period of repayment
and the rate of interest charged by the bank. Where the amount advanced is Rs.
2,00,000 and the repayment period is 60 months, EMI at the following rates of
interest assuming interest calculated at monthly rest and repayment starts one
month after disbursement of loan, shall be as under
|
Rate of Interest |
8% p.a. |
9% p.a. |
10% p.a. |
11% p.a.
|
12% p.a. |
|
Amount of EMI (in Rs.) |
4055 |
4152 |
4249 |
4348 |
4449 |