Car Loan

The car loan came into existence in the year 1919, with the General Motors Corporation bringing up the General Motors Acceptance Corporation that arose as response to the rising demand for automobiles with American consumers post World War I.

In the year 1919, GMAC authorised desks in various North American cities. While car loans were there, majority of American consumers paid cash for their automobiles in the first half of the century.

Car loans work along the same rules and processes that are applicable to various other loans. For most of the situations, during purchase of car, the borrower will apply for a specific car loan. The consumer may also utilise a personal loan for purchasing car.

• Standard: Here the financier gives you the money to buy a car. This is a simple loan that requires one to be financially well off and is willing for a little extra expense. This kind of loan can be non-secure with a higher interest rate.

• Commercial Hire Purchase: Financier purchases the car and hires it to the customer for a set time period. This period may be for individuals or enterprises. Monthly payments mostly pay out the full loan in the established period, with the vehicle being transferred to the user when all payments are complete.

• Finance Lease: Financier purchases the car and then leases it to the user. This allows for immediate utility of the car without capital investment. These leases are there for individuals as well as enterprises when the car is for business utility. Motorist disburses fixed, monthly rental payments and are financially responsible for maintenance and the trade-in risk from the car.

• Novated Lease: This is a three-way method that reduces the employee's wage for equal value car benefit. Employee leases the car directly from the financier. Employer has to pay the financier via a deed made on the employee's salary. Most operating charges of the car such as registration, etc. get covered by the motorist. The motorist has the responsibility for the vehicle when termination of employment takes place.

• Operating Lease: This is an agreement that supplements the financier’s intent for buying the vehicle and renting it for the motorist. Here, the financier keeps ownership of the car. The motorist has zero risks associated with vehicle’s ownership.

• Chattel Mortgage: This is a fixed loan that allows the financier to advance money for purchasing a vehicle. Here, the financier has a mortgage over the car which is used as security for the loan. A residual payment may also be placed at the end of the term.

Salaried Folk:

• This is inclusive of employees of private limited enterprises, employees of public sector units that include local, central and state bodies.
• Individuals who are a minimum of 21 years of age at the time of applying for the loan, and no older than 60 years at the end of the loan tenure.
• Individuals who have had a job for at least 2 years, with a minimum of 1 year with the current employer.
• Those who earn a minimum of INR 3,00,000 per year, including the income of the spouse/co-applicant.
• Individuals who have a telephone/post-paid mobile.

Self-Employed under sole proprietorship:

• This is inclusive of self-employed proprietors in self owned businesses of manufacture, trade and service.
• Individuals who are a minimum of 21 years of age at the time of applying for the loan, and no older than 65 years at the end of the loan tenure.
• Those who have been in business for a minimum of 2 years.
• Should earn at least INR 3,00,000 per annum.

Self-Employed under partnership firms:

• This includes partnerships under self-employed business of manufacture, trade and service.
• Those who have a minimum turnover of INR3,00,000 per annum.

Self-Employed private limited entities:

• This is inclusive of individuals with private enterprises in the manufacture, trade and service zones.
• Should be making minimum INR 3,00,000 per year.

Self-Employed individuals under public limited companies:

• This includes directors of public limited enterprises in manufacture, trade or service.
• Should be making minimum INR3,00,000 per year.

The application process is simple, one can do it online or by visiting the bank branch and filling up the required form and providing the necessary documents. However, do keep in mind the following points:

• Credit Rating:

This is the number that financial institutions observe while deciding whether or not you’re an investment risk. You should get a copy of your credit report before applying for loan, this ensures that you won’t experience any surprises of the application getting rejected.

• Keep Paperwork Ready:

Keep documentation ready to simplify the loan application process.

• Find out more about pre-approval:

This allows you to know if you eligible for a car loan before the hunt is started. This lets you know how much you would spend with no worries about price negotiation or loan’s term.