Owning a car is a dream for many. Leading car brands offer the latest cars in different body styles and features, so choosing the right model is challenging. But, it can be even more confusing to understand the different car financing options. A car is a significant financial investment. With several financing options, getting a car has become easy and convenient.
Nowadays, with digitalisation, leading online car-selling platforms like ACKO Drive also offer financial assistance. However, having thorough knowledge and understanding is always a good choice. If you are looking for the ideal car financing option, this guide will explore the topic in detail for easy comprehension.
Examining Car Loans
Car loans are a very popular car financing option in India. There are two main types of car loans that you can opt for. These are explained in the following sections.
Bank Loans
Banks provide car loans with adjustable repayment schedules and set interest rates. To apply for a loan, you can go through car dealerships. You can also directly approach banks. To get the best loan, you should check a few things. These include the interest rates, processing costs, and repayment schedules different banks offer.
Remember that most banks calculate your monthly income, credit score, past debt repayment history, and employment status before approving a car loan. In fact, most banks need a minimum CIBIL score of 701.
Non-Banking Financial Companies (NBFCs)
NBFCs also offer car loans. The criteria and characteristics are almost similar to that of bank loans. They might offer more lenient qualifying standards, making it simpler for people with bad credit or no credit history to get approved for a loan.
The criteria are less strict. Applicants must be at least 21 years of age and a minimum yearly salary of ₹2 lakhs is required. This, however, depends on the particular financer. Independent contractors and self-employed individuals must show at least one year of experience in their respective fields.
EMI & Down Payment
You can pay a certain amount at first while availing a car loan, which is called the down payment. A down payment, calculated as a proportion of the car’s on-road cost, is usually required for car loans. A minimum downpayment of 10% of the car’s total value is required for financing your car.
Equated Monthly Installments (EMIs) repay the remaining balance over a predetermined period of time, often three to seven years. It is critical to determine how affordable the EMI is and select a payback period that works with your budget.
Car Leasing: A Growing Choice
Car leasing has become a popular option among Indian car lovers nowadays. The main features of car leasing are given below:
- Fixed Monthly Payments: During the lease term, you must pay a fixed monthly rental amount, eliminating the need for a big down payment or loan.
- Maintenance and Insurance: Most car leases include maintenance and insurance, which can save you the hassle of paying extra money. However, you should review the lease terms to understand the obligations and coverage.
- Ownership and Resale Value: Unlike car loans, leasing does not indicate ownership rights. When your lease expires, you have three options: return the car, decide to extend it, or buy the car at a pre-determined residual value.
Car Finance from Dealerships
Car dealerships frequently work with banks or NBFCs to provide their financing choices. Investigating these options before purchasing a car is worthwhile because they can include promotional offers or unique interest rates. You can get in touch with prominent platforms like ACKO Drive and choose the car of your dreams. After that, you can discuss your financial queries, and they will offer you the best options and guidance.
Personal Loans
You can also opt for a personal loan to buy a car. However, these have higher rates of interest. They also require an excellent credit history.
Conclusion
Nowadays, a car is more of a necessity than a luxury. It requires sizeable finance. When planning to buy a car, it is important to see the many car finance options offered in India. Whether you choose dealer financing, personal loans, auto loans, or leasing, evaluating your financial status and comparing terms and conditions such as interest rates and repayment schedules is critical.
