Owing a car, especially in
today’s day and age, has become more of a necessity. In a country like India
especially, buying one is the second most expensive purchase that most of us
would make, second only to our home. In all probability, the price of the car you’re
considering will be a tad out of your budget, and realizing this there are a
lot of financial establishments who come up with car financing options to enable to you to buy the car. These days
you could apply for car finance online and even if you choose to go the
traditional offline way, you would only need basic documents like proof of id,
address, income, etc.
So what is Car financing? Simply put, it is a form of secured loan where you
provide your car as collateral. As far as the actual loan amount is concerned,
it is calculated based on factors such as current value of the car, the type of
car, value of the car is the second hand market, deprecation rate of the car,
etc. Most financial establishments will however, offer up to 100% of the
on-road cost or at least 90% of the ex-showroom cost.
Moving on to repayment tenure; car financing companies normally set the
repayment tenure between 1 to 5 years. As far as EMIs are concerned; the lower
the repayment tenure the higher the EMIs tend to be and vice versa. Now, what
if you default on default on a payment? Most establishments will let you to
default up to two payments. Any more than that and they can have the right to
seize your car. Loan defaults have a direct impact on your credit rating, which
then makes it extremely tough for you to apply for a loan in future.
Moving to interest rates; you can
choose between a fixed and variable one. Also, considering how popular car financing is, financial
establishments have extremely competitive interest rates. You can also
negotiate the interest rate and try to bring it down. Typically, if you are a
devoted patron of a particular financial establishment, they will lower their
interest rates for you.
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