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What is a Car loan?

Over the decades, a car has become a necessity rather than a luxury for every Indian family, especially in case of middle-class households. Nowadays everyone has become used to the comfort, luxury and convenience offered by four wheelers. Gone are the days when people had to save money for years and years, in order to buy a family car. Today you can easily avail a car loan and drive your dream vehicle back home in a matter of few days. The banks and financial institutions in India offer attractive car loans, both for new vehicles as well as preowned cars.

There are broadly three types of car loans offered in the Indian market – new car loan, used car loan and a loan against car. We will throw light upon the first two kinds in this section.  A new car loan is basically a personal car loan offered by a bank or NBFC to enable you to buy a new car. The amount of new car loan helps in bridging the gap between funds available with you and the actual on-road or ex-showroom price of the new car. In most cases, banks fund anywhere up to 85% 100% of the value of the new car.

A used car loan on the other hand is also a type of personal car loan, however one that helps you purchase a preowned car with the borrowed money. Normally, you can get up to 90% financing of the preowned car’s valuation. But please keep in mind that funding is normally available for pre-owned cars under 5 years of age.

What is its eligibility criteria?

The eligibility for a new or used car loan might vary from lender to lender. However, the common criteria laid by majority of lending establishments is as follows:

  • The applicant’s age should be between 18 years and 75 years
  • S/he should have a steady monthly income of at least 20,000
  • Car loan can be availed by salaried individuals as well as self-employed professionals or business persons
  • Salaried individuals should have been employed for at least 1 year at their current place of work
  • You should have all pertinent documents such as photo ID proof, address proof, income proof, bank statements, salary slips, certificate of employment etc. to prove that you meet the eligibility criteria

Probable interest rate & loan tenure

As expected, there’s a difference in the interest rates offered by banks and NBFCs for used car loans and new car loans. While the interest rate charged for new car loans varies from 8.5% to 14% per annum, used car loans are offered at slightly higher interest rates of 12% to 18% per annum. Talking about loan tenures, new car loans are offered for tenures ranging from 1 to 7 years. Used car loans on the other hand normally need to be paid back within a maximum of 5 years.

How to avail a Car loan in India?

The best way to avail a new car loan or a used car loan in India is by checking and comparing offers extended by all prominent lending establishments. The ideal approach should be to use a reputed website like GoSahi.com to carry out this analysis. Furthermore, experienced professional at GoSahi can guide you through the entire process and ensure that your car loan gets disbursed in quick time and without any hassles.