A loan against car security for vehicle purchase, often known as a car loan, is a popular financing tool today for aspirants planning to purchase new four-wheelers. These loans come with attractive features, terms, and facilities which make them convenient for borrowers to manage. Several reputed lenders also provide online loan account management facilities which allow borrowers to access their loan details easily for convenient tracking of due dates and timely repayments.
Several other facilities make car loans among the financing favourites for individuals across the income strata. However, it is always pertinent to remain well-informed of all details related to the advance for easy fulfilment of the new financial responsibility created out of such borrowing. Below are thus mentioned some important questions that you must have answers to when applying for a loan against car hypothecation. Check them out.
Is the Car Selected Eligible for Hypothecation?
Today, it is possible to avail a loan against car hypothecation for any of the vehicles’ makes and models. It thus eliminates any worries regarding which car should you purchase, allowing you to choose the vehicle model of your desire. Thus, all you need to see is if you find financing your desired car purchase affordable or not based on factors like interest accrued, EMIs payable and the total loan liability by the tenure’s end.
What is the Maximum Loan to Value Ratio Offered in the Financial Market?
As secured advances, car loans come carry an arrangement wherein the maximum loan availability for these financing options depends on the Loan to Value ratio or LTV of the lender. LTV indicates the total loan availability as the percentage of current market value of the asset to be collateralised.
When availing a car loan, you must make sure to research the financial market to know the maximum LTV availability from lenders. Doing so can help maximise your total loan value for easy car financing. With some of the best lending institutions, the LTV can go as high as 90% of the car’s value. It means that if the car’s current market price is running at Rs.5 Lakh, eligible candidates can avail funding of up to Rs.4.5 Lakh for vehicle purchase.
What are the Down Payment Requirements for Car Purchase?
Since LTV limits the total loan availability only up to a certain percentage of the vehicle’s value, the borrower needs to finance the remaining amount out of pocket, to be met as down payment. The amount you would need as down payment thus depends on the LTV available from your lender.
You must, however, also examine the aspect where some car sellers require a minimum down payment for the sale to conclude. Accordingly, you can arrange the finances for such payment for the loan application to be initiated.
What Should Be the Ideal Tenure for Car Loan Repayment?
The maximum loan tenure availability for car loan repayment can go up to 5 years with some of the best lenders. It thus allows one sufficient flexibility to choose between a short and extended tenure based on his/her repayment capacity.
The decision regarding ideal tenure for loan against car repayment is, however, entirely subjective for each borrower. One must assess his/her repayment capacity and select a tenure whose EMIs best suit their financial standing. Using a car loan EMI calculator can significantly help in making this borrowing decision as you can enter the different tenure values to check EMI suitability and decide accordingly.
Are Penalty-free Prepayments Available for Car Loans?
Yes, most car loans come with prepayment facility, whereby you can choose to either part-prepay the advance or foreclose your loan account altogether through a lump sum payment. Although it can be done at any time before the tenure’s end, lenders often restrict its accessibility after specified number of EMI payments only. Also, if you make prepayment after meeting such requirement, no penalty is levied on such payment. The charges applicable on the repayment option are low to no as well, which makes them affordable too.
Before applying for a loan against car, you must also check out the eligibility criteria and document requirements in detail. Doing so should help you arrange for the application beforehand and also improve your chances of loan approval.