Car Loan Interest Rate In Hyderabad – Editorial Note: The consultant may receive a commission on sales made through links on this page, but this does not reflect the editorial opinion or our opinion.
Owning a car is still a dream of most Indians. While for many people, a car is a better way to get around to their workplace or take their family on vacation, for many others, it is still considered a status symbol. According to the National Family Health Survey (2019-21), the percentage of households in India that own a car is only 7.5%. Although this share is increasing (it was 6% in 2018), car ownership in India is still relatively rare compared to developed countries.
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Banks and non-banking finance companies (NBFCs) have made car ownership easier for a large section of middle and upper class Indians. These lending institutions offer loans with attractive features aimed at simplifying car ownership. Attractive interest rate, easy repayment period, high loan amount (in % of car value), easy digital process and quick payment is one of the reasons for the increase in car ownership in India. Also, owning a car does not always mean buying a new car. Owning a second-hand or pre-owned car is an option that is gaining momentum in India.
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For a person who is planning to buy a new or pre-owned car, there are loan providers working in the market. Car loans are designed to facilitate the purchase of a new car while car advance loans facilitate the purchase of a second car. Although both products aim to make buying a car easier, there are differences between these products. It is important to understand both types of loans in order to make the right decision.
A car loan (also called a car loan or a car loan) is a loan provided by a lender to a borrower to purchase a new vehicle. It is a secured loan with a working car as tangible collateral. The lender pays the borrower in the form of monthly installments (EMI) at a predetermined rate of interest and for a specified period. Apart from EMI, there are also fees and taxes paid by the lender. You have to read the fine print to fully understand the charges, which can sometimes be unclear.
Used car loans are also called used car loans or used car loans. This is also a secured loan, but in this case it allows the borrower to buy a car in advance (used or old). Similar to new car loans, pre-owned car loans are repaid by the borrower in the form of EMIs at a predetermined rate and tenure. The loan amount approved by the lender depends on the age of the vehicle, its physical condition, general health and performance parameters of the vehicle in addition to various features of the vehicle. the lender. As with loans, you need to read the fine print carefully so that there are no (hidden) charges that may surprise you later.
Although the underlying asset (car) is the same, car loans and existing car loans differ in several parameters. Let us consider some of them.
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A car loan is taken out for the purchase of a new car; therefore, the buyer can be sure of the “new” car. The car has been shipped from the factory to the warehouse and then to the dealer showroom and is therefore in a fragile, unused condition with all functions in good working order.
On the other hand, a pre-owned car loan is used to buy a used car. Therefore, it is important to check the condition of the car that people want to buy. There may be some features that may not be as good as a new car. Buyers need to be aware of them so that there are no unpleasant surprises later. Recently, many organized players have entered this field. They do a lot of testing of the car before they buy it from the previous owner and sell it to the new buyer. The value of a used car depends on the age of the car, its physical condition, the condition of the engine and parts, etc.
The interest rate for the existing car loan is slightly higher than the loan. Buying a used car is more risky for the above reasons. Car loans in India are currently available at interest rates starting at 7% per annum, while home loans start at 10% per annum existing car. Interest rates may vary depending on prevailing conditions.
Car loans have a minimum term of seven years. On the other hand, deciding on the term for a car advance loan is quite difficult. This is because the value of the car and the use of a car decreases with the increase in the years of use. Generally, the term for a car advance loan is not more than five years. Due to the limited life of the existing car, it is in the interest of the borrower to enter into a car loan that has a short term or pay off the loan before the actual time.
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Car loans take longer to get approved than new car loans. This is because in the previous case, the lender does a thorough inspection of the car. If the car was previously purchased from an unorganized player, the payback time is a bit longer. If the pre-owned car was purchased from an organized dealer, the time spent on the payment may be less. This is because organized players do a thorough inspection of the car before buying it from the first owner. Therefore, the time spent by the lender in evaluating the car is less.
The Loan-To-Value (LTV) ratio refers to the loan amount paid as a percentage of the vehicle’s value. The LTV for a pre-owned car loan is slightly lower than that of a car loan, because of the risk involved. The LTV for a new loan can be as high as 100% while for a pre-owned car loan it is usually 80-90% of the value of the car.
Despite these differences, there are similarities between these two types of loans. First, borrowers need to do detailed research to find the right lender. Second, lenders prefer borrowers with high credit scores (probably over 750). Above all, borrowers need to be self-disciplined in paying their debts so that they do not have a negative impact on their credit score.
The rise of financing options, the used car e-commerce market and lender-to-lender policies have boosted car purchases in recent times. Along with new loans, pre-owned car loans have emerged as another option for those looking to pay a lower down payment on a car purchase. The responsibility of the borrower is to make a good choice in deciding the type of car (new or used) and the lender.
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The information provided in the Advisor is for educational purposes only. Your financial situation is unique and the products and services we discuss may not be right for your situation. We do not provide financial advice, counseling or brokerage services, and we do not recommend or advise anyone to buy or sell any particular stock or securities. Performance information may have changed since publication. Past performance is not indicative of future results.
The advisor adheres to editorial standards of accuracy. To the best of our knowledge, all content is correct as of the date of publication, although the services contained herein may no longer be available. The opinions expressed are solely those of the authors and are not endorsed, endorsed, or approved by our affiliates.
Abhay Bhutada is the Managing Director of Poonawalla Fincorp Limited. He has over 15 years of experience in retail and commercial lending. Abhay is an accountant.
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Every common man dreams of a car that he wants to own and drive when he starts earning money. But this dream has come true only for a few due to financial constraints. A car loan allows you to make this dream come true with the lowest car interest rate and the least amount of paperwork. Financing your car through a reputable financing institution is a smart choice if you run out of money to buy the car you want.
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