With the growing competition for personal finance among banks and financial institutions, every bank/ financial institution is coming with attractions like prompt finance, easy installments, low interest rates etc. An individual looking for car finance should compare the offers carefully before finalizing the bank / financial institution for availing the finance. Some important aspect need to be compared are:
The features, in general, of Car Loans available from banks are as under:
|Purpose||For purchase of a New Car, a Jeep or a Multi Utility Vehicle
For purchase of a Used Car a Jeep or a Multi Utility Vehicle. Usually banks finance used cars not older than 5 - 10 years. The age of the used car eligible for finance differs from bank to bank. For taking over of a Car Loan from another bank or financial institution.
|Amount of Loan||The amount of loan is determined by:
|Interest Rate||The interest rate applicable on car loans is usually linked to the Advance/ Lending Rate of the financing bank and varies with the change in Prime Lending Rate (PLR)/Advance Rate of the bank.
Some banks charge interest on daily reducing balance basis and some banks charge interest on monthly reducing balance basis. The charging of interest on daily reducing balance basis results less interest load on the borrower.
|Processing fee and / or Application Handling Charges||The amount of processing fee / Application handling charges differ from bank to bank. Some banks charge a flat amount and some charge a percentage of the loan amount.|
Some banks also retain a portion of the processing charges/fee in case of rejection of the loan application by the bank.
|Type of Loan and Repayment||The loan is sanctioned as Term Loan. The repayment is allowed by way of monthly installments for a maximum period of 7 years.|
|Application||Application for the loan is required to be made on standard application form of the financing bank / financial institution.|
|Pre-sanction Documents||The application has to accompany the following documents:
|Post Sanction/ Disbursal Documents||After sanction of the loan by the banks, undernoted documents are required to be executed/ furnished by borrowers to banks: |
|Pre-payment / Advance Payment of Loan||All banks usually charge penalty for pre-payment of loan. However, the amount of penalty differs from bank to bank.|