Flexible/Custom Repayment Options  

In the standard/default loan repayment plan, the customers pay the same EMI throughout the tenure of the loan.

Since the pandemic outbreak, the Banks have gone creative with Car Loans , and now several repayment options are available.

Besides the standard option, the customers can customize their loan repayment plans by opting for a lower EMI initially, and then increasing it gradually or regularizing it.

Below are the flexible/custom repayment options that we can provide you.

 

3 Months Relaxed EMI

  • In this loan repayment plan, first 3 EMIs are reduced by up to 70%. EMIs start at just Rs. 499 per lakh of loan amount, and then regularizes. 

  • This offer is available for all customers.

Step Up Payment

  • Since an individual's income generally grows over time, a car that may seem unaffordable now could be affordable next year.

  • You can start the repayment of your loan with low & affordable EMIs and gradually increase (say by 10% every 12 months) the EMIs amount over the tenure. 

Step Up plus Balloon Payment

  • This is a combination of Step Up payment and Balloon payment plans.

  • In this EMIs start to be very low, and increase every 12 months. A fixed loan amount is to be repaid at the end of tenure.

  • This option generally has the lowest EMIs in first half of the loan tenure.

6 Months Relaxed EMI

  • In this loan repayment plan, the first 6 EMIs are reduced by up to 75%. The EMIs start at just Rs. 499 per lakh of loan amount, and then regularizes.

  • This offer is available for only salaried individuals & professionals.

Balloon Payment

  • A fixed part of the loan amount, such as 20%, is paid as the last EMI of the loan, while 80% is paid via EMIs throughout the tenure.

  • This can reduce the regular EMIs during the loan tenure significantly.

Bullet Payment

  • This option constitutes a ballon payment every 12th EMI. So after you pay 11 low EMIs, you pay a higher 12th EMI.

  • This is helpful for those who are in a job or a business where they expect high income, such as a bonus, once every year.

Latest Car Loan Interest Rates

& EMIs of Top Banks in India

(updated 21st August 2020) 

Fast Car Loan EMI Calculator

Eligibility Criteria for Car Loan

For Salaried Individuals

  • Age Criteria: Minimum age of 21 years at the time of applying for the loan, and maximum age of 60 years at the end of the loan tenure

  • Employment Criteria: At least 2 years of work experience, and employed at a private limited company or a public sector undertaking (including central, state and local bodies)

  • Income Criteria: Minimum income of Rs. 3,00,000 per year (Rs. 25,000 per month), including the income of any co-applicant which can be a spouse

For Self-Employed Individuals - Partnership Firms & Private Limited Companies

  • Employment Criteria: Owner or Director of a Partnership or a Private Limited Company in the business of manufacturing, trading or services

  • Income Criteria: Minimum turnover of Rs. Rs. 3,00,000 per annum (Rs. 25,000 per month)

For Self-Employed Individuals - Sole Proprietorship

  • Age Criteria: Minimum age of 21 years at the time of applying for the loan, and maximum age of 65 years at the end of the loan tenure

  • Employment Criteria: Self-employed sole proprietors in the business of manufacturing, trading or services, for at least 2 years

  • Income Criteria: Minimum income of Rs. 3,00,000 per year (Rs. 25,000 per month), including the income of any co-applicant which can be a spouse​

For Self-Employed Individuals - Public Limited Companies

  • Employment Criteria: Director of a Public Limited Company in the business of manufacturing, trading or services

  • Income Criteria: Minimum turnover of Rs. 3,00,000 per annum (Rs. 25,000 per month)

Documents Required for Car Loan

For Salaried Individuals

  • Any of the following documents as Proof of Identity: PAN card, Passport, Driving License, Aadhaar Card, Job card issued by NREGA, Letter issued by the National Population Register containing details of name & address

  • Any of the following documents as Proof of Address: Voter ID, Electricity Bill, Telephone Bill, Property Tax Receipt

  • All of the following documents as Proof of Income & Proof of Employment: Latest salary slip, Latest Form 16 or ITR, and Bank statement of the previous 6 months

For Self-Employed Individuals - Partnership Firms & Private Limited Companies

  • Any of the following documents as Proof of Address: Telephone Bill, Electricity Bill, Shop & Establishment Act Certificate, SSI Registered Certificate, GST Certificate

  • All of the following documents as Proof of Income: Audited Balance Sheet, Profit & Loss Account of the previous 2 years, Company ITR for the previous 2 years, and Bank statement of the previous 6 months

For Self-Employed Individuals - Sole Proprietorship

  • Any of the following documents as Proof of Identity: PAN card, Passport, Driving License, Aadhaar Card, Job card issued by NREGA, Letter issued by the National Population Register containing details of name & address

  • Any of the following documents as Proof of Address: Voter ID, Electricity Bill, Telephone Bill, Property Tax Receipt

  • All of the following documents as Proof of Income: Latest Income Tax Return, and Bank statement of the previous 6 months

For Self-Employed Individuals - Public Limited Companies

  • Any of the following documents as Proof of Address: Telephone Bill, Electricity Bill, Shop & Establishment Act Certificate, SSI Registered Certificate, GST Certificate

  • All of the following documents as Proof of Income: Audited Balance Sheet, Profit & Loss Account of the previous 2 years, and Bank statement of the previous 6 months

Must Know about Car Loans

What is LTV, and what is the maximum LTV available?

 

LTV is the ratio of the Loan amount to the Value of Car. On road price of the car is taken as the Value of Car.

For both new & old cars, loans are available for up to 100% LTV. So, one can get a loan amount of up to on-road price of the car.

What is the minimum and the maximum loan that I can get for a new car loan?

 

Minimum car loan amount available is Rs. 100,000 (Rs. 1 lakh). 
 

Maximum car loan amount available is same as the on-road price of the car, because maximum LTV can be 100%. So it varies by the car model, variant & location.

What are the benefits of a car loan?

 

The key benefit of car loan is the ability to afford a car now rather than after a number of years, without depleting  savings. Moreover, car loan is a secured loan like a home loan, thus the interest rate on car loan is much lower than personal (unsecured) loans.

 

Car loans are not only available with 100% financing available for up to 7 years, but also come with custom-fit repayment plans with balloon payments, bullet payment plans, step up plans & EMI holiday options.

Is it better to buy car with cash (no loan, full downpayment) or take to take max car loan or a combination of the two?

 

The right answer depends on your situation. So here are three scenarios for three right answers.


Scenario 1: Let us say you have a lot of money lying around in Savings Accounts or Fixed Deposits, but don't foresee any significant expenses (such as wedding, education, healthcare, home downpayment) coming up in the next say 3-5 years. Then you would be getting a low interest rate on your saved money (about 2-5% minus taxes) but will be paying a higher interest rate of say 7.5% on car loan. Example of this might be someone who doesn't need to financially support parents, has good paying job and savings, is not getting good returns (at least 5% above 1 year Bank FD) on investment, does not have any outstanding loans, and is not looking to take a loan such as a home loan in the next few years. It makes more sense in such cases to buy car in all cash/downpayment without any loan.
 

Let's get real. Most of us are not in scenario 1, but are in scenario 2 or 3.
Scenario 2: Let us say you are doing a job for a couple of years, don't have a lot of savings, but are earning well enough to comfortably pay car loan EMI. In this case, you can take car loan for much of the value of the car. But please ensure that you can afford to pay the EMI, and are not stretching your finances too much. If you reckon that it could get difficult to pay EMI, then it is advisable to wait for a bit longer to buy the car.

 

Scenario 3: This is where the vast majority is. This is the situation in which either you have good savings to buy a car in cash but also want to save for future expenses (expected or unexpected), or you have some money to make downpayment and can easily afford the EMIs. This is the situation to optimize the downpayment with car loan amount. Generally, most people optimize by taking loan between 60% and 80% of the value of car, and making a self-funded downpayment of 20% to 40%. This is a good balance for most of us. I personally took car loan of 85% value to buy my first car, and then of 70% value to buy my second car a few years later.

If I meet the eligibility criteria, will I definitely get a loan?

Unless you have a recent case of bad credit behaviour, you would likely be accepted because car loan is a secured asset loan. Eligibility criteria of a loan are the basic conditions to accept application of loan, and do not provide all the details for evaluating the loan application.

 

If someone meets the eligibility criteria, then the concerned Bank will accept & evaluate the application. After evaluating the applicant according to their credit policy, the Bank provides decision. This decision is made in a few mins as it is completely digitized and automated.

Why is there a range of car loan interest rate, and will I get the lowest interest rate if my loan application is approved?

The interest rate of the car loan is determined by other factors such as your CIBIL score, income, employment status & type, and many more. The lowest interest rate car loan is given to the customers with the lowest credit risk & excellent credit score.

 

Bank's try to estimate customer repayment risk, and interest rates increase as the expected risk increases. However, there is generally an upper limit to the risk acceptance, and customers with a low credit score may not get access to Bank credit. Alternate lenders such as NBFCs and FinTechs are available for lending in the low credit score space, but they charge higher interest rates.

 

Try to build your credit score & history but by taking a small loan and then paying back them on time. Credit history also takes into account post-paid mobile bills, so don't delay their payments.

How will the actual interest rate be determined for my car loan application?

Caryaan publishes both the minimum and the maximum interest rate on car loan for all the major Banks to create transparency. The actual interest rate on your car loan is determined by the lending Bank's credit policy, and every Bank have its own policy. The credit policy exists to mainly determine the probability (likelihood) of customer paying on the car loan time.

 

Customers who are perceived to be lower risk are given loans at relatively lower interest rates and vice-versa. Additionally, women borrowers can typically get car loan at relatively lower interest rate (by 0.05% to 0.15%) due to government policies.

What is customer risk segmentation?

Any lender whether Bank or NBFC or FinTech needs to evaluate the probability (chances) that a given car loan applicant will repay the loan amount. To evaluate this, the lender will look for other similar customers who it has lent to in the past and will look at the applicant's past repayment behaviour (known as credit history) from credit bureaus.


To identify similar customers, the lender will test various parameters (data points) and check whether those parameters significantly change customer's risk of default. The lenders will then define a set of such parameters (typically 5 to 8) that significantly segment the risk.


Then for any new applicant, the lender will associate an appropriate risk segment, and hence a probability of default. In case, there is not enough data (known as thin file) to identify the risk of the customer, the lender may simply decline to give car loan to the applicant.

How do Banks determine whether to approve or decline a loan application?

Banks determine whether to approve or decline a customer based on the probability of a customer repaying the loan. This probability is computed by using data such as CIBIL & other bureau score, credit history, income level, work experience, employment type, residence type & stability. Please do note that the probability is an average prediction for a segment of customers, and is not a reflection of an individual customer.

 

Customer with no credit history may get slightly higher interest rate because their bureau score would be lower. Paying car loan on time will build a good credit history and increase the credit score. If someone pays their car loan on time, their credit score should propel to excellent/top category.

What is credit score, and how is it interpreted?

Credit score is number on a given scale created by credit bureaus to indicate the level of credit risk of a customer. Confused? Here's an example to simply it: If someone's credit score is 750, on a scale of 300 to 900, it would indicate that he person's credit risk is low. So when this person applies for a loan, the Bank or NBFC will check his/her credit score, and use it as an important input into their risk models to give a resultant car loan credit decision and interest rate.


Four credit bureaus are licensed by RBI to operate in India, and their names are TransUnion CIBIL, Equifax, Experian and CRIF Highmark. They all have different scales (such as 300 to 900, or 600 to 1200) of measuring credit scores. Since scales are different, credit scores cannot be directly compared across bureaus. For example, a 750 credit score on a scale of 300 to 900 is better than 800 credit score on scale of 600 to 1200.

Do Banks use any credit bureau or history data other than the credit score?

Not necessarily, but most Banks do in some form or another. Banks generally tend to have what they call 'Hard Cuts'. Hard Cuts are generally straightforward rules to remove applicants such as no EMI overdue in the last 1 year, or no loan default in 5 years, and so on. If you have something bad on your credit bureau file, it does not mean that two will definitely not get a Bank loan.


Different Banks have different requirements, and some may approve car loan but with a slightly higher interest rate (say 9% instead of 7.5%). NBFCs are generally very accommodating but might charge you a high interest rate (such as 12%-14% range for new car loan compared to 8%-10% by Bank). It's advisable to first try to get a car loan from Bank rather than NBFC, unless there is bad credit behaviour in the last 1 year. Only if you don't meet Bank's eligibility criteria, you should apply to NBFC. If you need personalized advise, please talk to us or consult your financial advisor.

Can I check my credit score & detailed report? How so?

You can get your own credit score and report for free from bureau by going to their website. You will need your PAN card, email id, and phone number to register. After you register and login, the bureau might show might the score on screen, and will email you the detailed report. According to RBI rules, credit bureaus must provide free credit score & detailed report to customers for their own information. It is advisable to get your own credit score & report directly from bureau at least once a year.


Registered Banks & NBFCs can get credit score & report of an individual when they apply for a loan and not otherwise. Without a loan application, an organization must get an individual's explicit approval to his/her receive credit score & report from bureau.

Can I check my credit score & detailed report? How so?

You can get your own credit score and report for free from bureau by going to their website. You will need your PAN card, email id, and phone number to register. After you register and login, the bureau might show might the score on screen, and will email you the detailed report. According to RBI rules, credit bureaus must provide free credit score & detailed report to customers for their own information. It is advisable to get your own credit score & report directly from bureau at least once a year.


Registered Banks & NBFCs can get credit score & report of an individual when they apply for a loan and not otherwise. Without a loan application, an organization must get an individual's explicit approval to his/her receive credit score & report from bureau.

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