Car Loan is one tool that has given power of car purchase to the masses…
As you already know, there are several modes of transport available at discretion these days. One can choose between public transport like rickshaws, cabs, buses or local/metro trains or you can drive in your own car or a motorcycle. Public transport can be cheaper but nothing beats the comfort of your own car/motorcycle. In the last few decades, car as a personal transport has gained a lot of popularity and has become more of a necessity than luxury. Majority of the populace prefers to get a roof over the head which can help in rains, sun as well as save from the chill of winters. It also brings in the possibility of more people from the family travelling together, along with a sense of being safer than two wheelers. With the ever increasing purchasing power of consumers and entry of multiple manufacturers in the market, cars have become comparatively much more accessible and easy to buy as compared to the scenario two or three decades ago.
However, owing to the huge disparity in the common man’s income vis-à-vis car prices, we are still way behind than a lot of other countries. This means that our monthly salaries are still not enough so that one fine day you decide to get a four-wheeler with your 2-3 month’s savings, visit a showroom, and get a spanking new piece of metal home. But what has come to the scene is easy availability of finances in the form of car loans which are provided by various financial institutions and banks. This has revolutionized the way we purchase cars and how accessible have they become for a vast majority of India’s population.
So, What Exactly is a CAR LOAN?
Just like any other loan, by definition, a car loan is a sum of money borrowed to buy a car and it is expected to be paid back, with interest, over a stipulated time duration. A certain predetermined amount has to be paid every month over the period of this duration known as EMI (Equated Monthly Instalments). These EMI’s are sum of principal and interest amounts.
Factors Affecting EMI
Calculation of this EMI will depend on number of factors:
- Loan Amount: This is the amount which is lent by the bank/financial institution.
- Car Loan Interest Rate: It is the cost of taking the loan and is determined by the financial institution.
- Down payment: This is the amount which one pays upfront for car purchase. Sometimes, the lending institute may mandate a certain amount to be paid upfront by the buyer and the remaining sum is lent by them. Buyer also has the flexibility to pay more than the mandated amount if possible, which will result in reduction of the loan amount.
- Loan term: This is the duration over which the loan should be repaid.
In addition to these, there may be some processing fees or other costs involved for availing a loan but these should be paid upfront – something one must keep in mind.
We are living in times when getting car loans has become very easy. There are many ways to know one’s eligibility, easiest being exploring financial institution’s website or reaching out to them directly through branches or call centers. Not just this, these banks and institutions also provide flexible options in choosing durations and mode of repayment, like auto account debits etc. as per one’s need and preferences. Financial institutions also have designed tools like car loan EMI calculators which are easily accessible through their websites and can help in quick planning and calculation of how much EMI one should pay to buy their dream car. Just enter minimal details and you have the results in front of you – no need of number crunching and straining your brain! With minimum documentation and in a very short time, loans can be made available, without causing any delay in the car buying process.
Car loans are making cars accessible to people who, in generic circumstances, may not be able to buy one and that too in this easy manner. Gone are the days when cars were only for the rich and considered a luxury. Car loans have brought this convenient mode of personal transportation in easy access of majority of population, without putting a strain on their savings. But remember one thing – do not go overboard and borrow only that amount of money from your financial institution which you can repay!
