Why Car acts as a Collateral in Car Loan?

Many Indians desire to own a Car for several necessary chores that are required to be completed throughout the day. This is why Car Loans have become popular in India as the demand for Cars has increased significantly. In India, Car Loans are offered by Banks and financial institutions with an interest rate of 7.25% per annum. The processing fees and other charges depend upon the bank or financial institution that the applicant has applied to. The loan tenure offered usually ranges anywhere between 1 and 8 years.

The Banks and Finacial institutions demand the use of the Car as collateral for the sanctioning of the Loan because then the car would act as a security that the lending institution would be entitled to take over in case the borrower of the loan is unable to pay back the lending organization. The process of Loan application for a Car Loan is pretty simple and does not require a lot of effort from the applicant. The vehicle to be bought itself acts as the security for the loan thus the borrower need not worry about losing an asset that he/she already owns. 

 Eligibility Criteria:

The Eligibility criteria that are required to be fulfilled for the application procedure of Car Loans include the following:

• The age of the applicant should be at least 18 years and below 75 years.
  
  
• The minimum net monthly income of the applicant should be INR 20,000.
  
  
• The applicant should be self-employed or be employed with the current employer for at least the past 1 year.
  
  
• The applicant should be salaried and working for a government or private institution or self-employed.

Some banks and financial institutions might have few additional eligibility criteria as per the policies of the Bank. You can contact the Bank via online and offline mode to know further details about the eligibility criteria for the application process. If you have a good credit history and CIBIL score, the chance of the Car Loan getting sanctioned by the Bank increases significantly. This is why having a high credit score can prove beneficial for you in the application procedure.

Documents Required:The Documents required for the application procedure for Car Loans include the following:

1. Proof of Identity of the applicant
   
   
2. Proof of Age of the applicant
   
   
3. Proof of Income of the applicant
   
   
4. Proof of residence of the applicant
   
   
5. Few Passport-sized photographs of the applicant

Several banks and financial institutions may demand few additional documents and paperwork for the application process. The verification of the Documents submitted by the applicant takes around 14 to 21 days by the lending Bank. You can check the status of our application through a visit to your nearest bank branch, by calling the customer care service of the Bank, or by visiting the website of the Bank you applied to.

You can use a car loan EMI calculator to estimate the monthly repayment amount you need to pay back to the bank during the tenure of the loan. The requirements of these Loans include the rate of interest chargeable, processing fees, loan tenure, and the Loan amount.

There are many popular Loan schemes available in India. Car Loan schemes that have gain popularity in the past few years include the following:

• State Bank of India Car Loan
  
  
• Axis Bank Car Loan
  
  
• Bank of Baroda Car Loan
  
  
• Kotak Mahindra Bank Car Loan
  
  
• ICICI car loan
  
  
• Bank of India Car Loan

You should perform thorough research before applying to Banks and financial institutions for Car loans. Compare the rate of interest, loan tenure offered and the processing fees being charged. Also, confirm the down payment amount that needs to be paid by you. In many cases, the Banks also offer to pay 100% of the cost of the Car. Check and analyze the prepayment policies of several banks and also keep in mind the time required for the complete application process.

Also read this: Improve Credit Score through Credit Card