what are the different types of auto loans?

many people wish to buy an automobile, and this number is increasing every day. people who do not have sufficient funds seek help from banks or nbfcs (non-banking financial companies) to buy a car. there are various types of loans available in the market that allow you to buy a new car or a used one.

new car loan

you can trust banks and nbfcs when you want to buy a new car but have inadequate funds. these financial institutions can help you meet the shortfall and finance the purchase. every financial institution will have different interest rates. the borrower will have to pay back the amount with interest within a given period, and you can calculate the interest payable using a car loan calculator. seven years is the maximum tenure for a car loan.

used car loans

people eyeing a pre-owned car can get a used car loan from financial institutions. these financial institutions might provide 80%-100% of the vehicle’s valuation as the loan amount. hence, the interest rate will be relatively high. used car loans are available for pre-owned cars not older than five years or do not exceed ten years at the time of loan maturity. an individual can use a car loan calculator to compute the amount required payable throughout the tenure.

loan against car

people can hold their cars as collateral when in need of funds to buy a new car. banks offer different loan amounts like ₹ 10 lacs or 100% valuation price of the car. the interest rate on this loan will be higher, ranging from 14% to 15% p.a. use a car loan eligibility calculator to check how much you would be required to pay monthly.

margin money loan scheme

for this loan, the borrower pays a small amount, mostly 10% of the loan, via a cheque as the first emi. the balance emis are paid through cheques deposited by the borrower with the financier. this loan scheme is said to have the lowest emi. you can check the emi amount with a car loan emi calculator.

security deposit loan scheme

here, the customer deposits a specific amount with the financier as security. the deposited amount is returned at the end of the loan tenure or when a customer forecloses the loan. the emi of this loan scheme is higher than other schemes.

advance emi loan scheme

the financial institution loans 100% of the amount payable. the customer has to pay about five to ten emis when receiving the loan. a customer will need to pay the remaining emis by issuing post-dated cheques.

hire purchase scheme

this loan scheme is provided by nbfcs not permitted to provide direct loans. the financier and the buyer make an agreement where the customer hires the car with the option to buy it later. a token amount is charged to the customer when he hires the car.

lease financing purchase

under this scheme, an agreement is made where the car’s ownership is with the financier, and the right to use the car is with the customer. this is a popular scheme among nbfcs as it benefits them.

conclusion

several loan options are available to meet the different needs of various customers. customers need to decide which loan would suit them the best. to compute the loan amount and emis, they can use a car loan eligibility calculator and car loan emi calculator. opting for a loan after carefully considering these factors is wise.