What Should Youngsters Know About Car Loan

Every young person who begins his career, wants to own a car. This dream goal is fervently extant even in the age of cab aggregators. This is because; owning a car is a milestone and is also an emotional goal- everyone wishes to go on long drive or road-trip with your loved ones.

Now, there was a time when one needed to save a fair amount of money to buy his/her first car, unless they were wealthy enough. Today you (irrespective whether salaried or self-employed) can drive in car of your choice sooner by availing of a car loan.

There are certain benefits of availing a car loan:

• A car loan application process is fairly simple
• The car loan is sanctioned quickly
• You don’t have to mortgage your existing assets;
• Instead of paying everything upfront, you just pay the down payment and thereafter, the EMIs
• Your existing finances are not exhausted
• Investments assigned for other important financial goals are left undisturbed
• Self-employed persons buying a car on the company’s name gets deprecation benefit

However, taking a prudent decision when availing of a car loan, and getting the best bargain at the showroom is equally important.

So, broadly here’s what you should do…

• Compare car loan rates
  • Comparing car loan rates online and/or talking to different banks will save you a good amount of money on interest outgo over the loan tenure (ranges upto a maximum of 7 years).
  • This saving, will even reduce your car loan EMI and bring down the total cost of the car loan and make sure you strike the best deal!

• Maintain a health credit score
  • The bank will source your credit report from various credit information bureaus to understand your credit score, which reflects your credit behaviour and credit worthiness.
  • So, if you are using credit cards and have availed of other loans (viz. home loan, Personal Loan, etc.), make sure you are repaying diligently to maintain a healthy credit score.
  • A credit score of 750 and above is considered to be healthy and can get you the best car loan deal. But if your credit score is low, putting your terms to get the best interest rate, and/or reducing the processing fees could be a challenge.
  • [Read here: How To Improve Your Credit Score]

• Make hay when the sun shines
  • Sometimes certain tangible offers are too good to miss, particularly during the festive seasons. Perhaps that’s the time to strike the best deal; because you not only get the best interest rate on car loan, but you could also get benefits such as discount, loyalty bonus, and valuable car accessories from car showrooms. Therefore, be on a lookout for who’s offering you the best deal during such times.

• Read the fine print
  • Many a times, there’s more to it than what meets the eye. An investigative approach can help you take right decisions.
  • Axis Bank offers flexible, quick, and cost-effective way to own your dream car.
  • Axis Bank offers an attractive car loan interest rate with a low processing fee, a repayment tenure of up to 7 years, and a higher loan-to-value ratio (100% on-road price funding on certain models) to purchase a new car.
  • You also have a chance to earn Axis eDGE Reward points and these can be redeemed against some exciting offers.

Here are broadly three ways you can apply for a car loan with Axis Bank:

• Visiting any Axis Bank Loan centre in person;
• By calling Axis Bank call centre numbers; at 1860 419 5555 or
• Applying online at www.axisbank.com

But applying for a car loan online is by far the best and comfortable --- it can be done from anywhere- home, office, café, on-the-go…and can be done any time.

All you got to do is, enter your name, e-mail id, mobile number, state, city, captcha code, and accept the disclaimer policy before you clicking on the ‘Submit’ button. Soon you will receive a call from one of the Axis Bank representatives who will explain the details.

Eligibility

As mentioned earlier, both salaried and self-employed individuals can apply.

• Salaried individuals need to be:
  • Minimum 21 years of age
  • Maximum years of age at loan maturity should not exceed 70
  • In continuous employment for a minimum of 1 year
  • Earning a minimum net annual salary of Rs 2.40 lakh p.a. (for all approved car models)

• Self-employed individuals need to be:
  • Minimum 18 years of age
  • Maximum 75 years of age at loan maturity
  • Earning a net annual business income of Rs 1.80 lakh p.a. for select model and Rs 2.00 lakh for others
  • In same line of business for minimum period of 3 years

Notwithstanding the above, even HUFs, proprietorship concerns, partnership firms, trusts, limited companies, too, can apply for car loan.

What are the documents required?

Along with the form, the following are required:

• Age proof (viz. Aadhaar, Passport, PAN Card, Driving License, Birth Certificate, etc.)
• Address proof (viz. Aadhaar, Passport, Voter Id, Driving License, etc.)
• Photo identification proof (viz. Aadhaar, Passport, PAN card, Voter Id, Driving License, etc.)
• Income proof (salary slip, Form 16, certified)
• Latest Income Tax Returns
• Bank statement
• Signature verification proof
• Duly signed loan agreement
• Pro-forma Invoice or Rate List
• Photographs

The bank will then scrutinise the application thoroughly, assess the type of vehicle you wish to purchase, the loan tenure (which can range up to 7 years), employment stability, your pre-existing EMIs (or Equated Monthly Instalments) on outstanding loans, and your credit score (to recognise your credit worthiness), before the bank decides to disburse the loan.

You, as a young salaried or a self-employed individual, can get pre-approved car loan , depending on your income and credit score, but subject to maximum loan tenure of 7 years and maximum loan amount of Rs 25 lakh.

To check if you are eligible for a pre-approved car loan, SMS CLPA to 5676782 from your registered mobile number or call 1860 419 5555.

Use Axis Bank’s car loan EMI calculator

To know how much your Equated Monthly Instalment (EMI) of your car loan will be, use car loan EMI calculator –– it is a great resource.

All you have to do is enter the loan amount, interest rate, tenure, and processing fee, and it will give the results: EMI, and indicate the total interest you would pay during the loan tenure.

How to repay the car loan EMI?

You can opt for either of these:

• Standing Instructions (can be used if you have a savings account, salary account, or current account with Axis Bank. Your EMI will be automatically debited from the account you specify.)
• National Automated Clearing House (NACH) can be used if you do not have an account with Axis Bank and would like your EMIs to be debited automatically at the end of the monthly cycle

How to remove hypothecation once the car loan is repaid in full?

The car loan being a secured loan, your car until the loan is repaid in full is hypothecated with the bank and cannot be sold.

Only once the car loan is repaid in full, the bank will issue a No Objection Certificate (NOC).

Thereafter, to remove the hypothecation from the Registration Certificate (RC), the following documents need to forwarded the Regional Transport Office (RTO) and the general insurance company (for car insurance) to take cognisance and remove the hypothecation:

• NOC issued by the bank
• FORM 35 (Notice of termination of an agreement of hire-purchase/lease/hypothecation)

Once the complete process is followed, a new RC book/card sans the lien will be issued.

To conclude…

A car loan gives you access to drive in your dream car and realize your financial and emotional goals.

But to make an informed choice, read the terms & conditions carefully. This will avoid the trouble later and ensure a smooth drive and hassle-free experience till you defray the loan.

Wish you happy and safe driving!

Happy Banking!

Disclaimer: This article has been authored by PersonalFN, a Mumbai based Financial Planning and Mutual Fund research firm known for offering unbiased and honest opinion on investing. Axis bank doesn't influence any views of the author in any way. Axis Bank & PersonalFN shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.