Car Loans Help to Make Your Dreams True

A car is a symbol of status for many people. Having your own car takes self-esteem to higher positions. So a car is more or less a dream to many people. It is not a very big deal for rich people to buy a car. Some of them have more than one car which is expensive too. But for middle-class people, sometimes buying a car remains a dream for them. But in the modern era of globalization, buying a car has been much easier than before. You can buy a car of your budget at any time if you wish to. There are various facilities available to buy a car now.

What is a Car Loan?

A loan is nothing but to borrow money from someone for the time being to meet up with your urgent requirements. Similarly, car loans mean borrowing money to buy a car. Generally, loans are given by different financial organizations that deal with lending money as well as various monetary services and products. So if you need to have a car loan, you can get into a bank or to any private organization that will lend you the money to buy a car. The car loans are not only available for new cars, but they are also available for the used cars too. There are very few people who buy cars with liquid cash.

Types of Car Loans

Car loans are of two types 1) Direct Loans and 2) Indirect loans.

  1. Direct loans are those where the borrower or the purchaser of the car arranges for his lender and borrows the money directly. Here the seller of the car gets the full payment and the borrower pays the EMI to the bank or financial institutions.
  2. Indirect loans are those loans where the lender is fixed by the car dealer and the purchaser of the car has to borrow money from them. Technically this is not a loan. Generally, the buyer and the seller come to an agreement about the payment of the price of the car and the buyer pays monthly installments to the seller.

Constituents of a Car Loan

The structure of a car loan is quite similar to other types of loans which consist of a principal amount and an interest amount that is charged as per the pre-fixed rate of interest. The principal amount of the loan is decided by the bank or agency that provides you the loan as per their rules and regulations. Some of the banks ask for some down-payment from the purchaser and it is taken as some percentage of the total cost of the car. The down payment amount is deducted from the total amount of loan.

Features of a Car Loan

The car loans provided by the banks have some salient features and some conditions which are to be fulfilled by the borrowers.

  • You may get the car fully financed by the lender if it is a new one.
  • For the used cars, the lending agencies will provide up to 85% of the total amount of the price of the car.
  • You can get a loan of maximum up to 3 times your annual salary. If you are self-employed, then you may get up to 6 times your yearly income.
  • You have to repay the amount within 7 years maximum and have to pay the EMI for a maximum of 1 year.
  • The processing of the car loan is pretty simple if you apply for it online.
  • Your interest will be calculated on the compound interest method and the monthly installments will be on EMI mode.