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Who wouldn’t want to own a car? But, the high price and maintenance aspect of the vehicle compels us to keep our dream on hold. However, the good news is, you can always opt to purchase a pre-owned car. So, let’s shed the myths attached to pre-owned cars. Pre-owned cars are not any more tinkered and polished pieces of metal. They are very much alike new cars. All credits to the changing trend of buyers. It has been observed that new-age buyers prefer to use a car just for a couple of years or three. And, with the increase in an offer from automakers, these buyers have a tendency to liven up their garage with new models of cars. Hence, for someone who is opting to but a pre-owned car must be rest assured that he is in for a good deal in departments like – price, quality, newness, warranty, and of course brand. Moreover, alike for a new car, you can also get a car loan for pre-owned cars.
A car loan or an auto loan is a loan taken to purchase a car – new or pre-owned – that could range from a small car to an SUV or an MUV. This loan can be applied online or offline and can be availed from different banks. The tenure of a car loan can be anywhere between one year to five years. However, some banks offer car loan up to seven years for the purchase of new cars. The amount of loan you can avail depends on your income, type, and cost of the car you are purchasing, and the percentage of finance your bank is offering. Usually, banks provide a loan of 80% to 90% of car price depending on the on-road price of the car. But, this percentage of loan amount may vary from one bank to another. Once you take a loan, you will have to do a monthly pay-out known as EMI. The EMI will be calculated based on the amount of loan that gets sanctioned. You can pay the EMI through an auto-debit facility if the bank you are taking the car loan and the bank you have a savings account is the same. Here, your EMI will get debited automatically at the end of every cycle. The other way to pay your EMI is by giving post-dated cheques to the bank, and you must ensure that your account has sufficient funds to avoid check bounce.
Though the basic formalities of applying for car loan remain same; there could be slight variations when it comes to taking a used car loan. Alike for new cars, there are many banks that offer used car loan. However, in the case of pre-owned cars, the amount of finance, loan tenure and rate of interest and such other terms and conditions will depend on the model and the resale value of the car you are planning to purchase. In addition, banks prefer and typically approve a loan if you are purchasing from an authorized used car dealer. It is seen that in most cases, lenders would not be willing to give a loan for a car that is older than five years. Hence, the model of the car is an important criterion when you apply used car loan.
The other aspects of car loan are you cannot sell your car until you pay off your loan completely. In order to sell your car, you must get an NOC from the bank which can be availed only after you pay your last EMI. Next, there are no tax benefits attached to a car loan. So, whether you are applying for a new car loan or a used car loan, in both the cases you will not be eligible for any tax benefits, unlike other loans like home loans. So, remember these aspects before you apply used car loan.
Thanks for reading this article. I'd love to hear your opinion. Please use the comments section below to share your thoughts. I frequently write new articles that also cover several other aspects of personal finance including credit cards, financial goals, health insurance, income tax, life insurance, mutual funds, retirement planning, and much more. You can Subscribe through Email and receive new articles directly in your Inbox or you can Subscribe through the RSS Feed and receive new articles in your feed reader.