car loans

Pros and Cons of a Car Loan

by Vinaya HS on September 6, 2016

in Finance

The following post is a sponsored post.

A new purchase is always exciting, be it a home or a car. However, ensuring you have a seamless experience while making your purchase is equally important. Selecting a good car is only the first step, but completing all financial tasks related to the same will ensure you drive off in your new car without any trouble.

If you have been contemplating on buying a brand new car but are discouraged by the burden of making a large payment, considering your current financial status may help choose between paying in cash and opting for a loan. Often, arranging for a large amount of cash may not be within your means, and in such a case, opting for car finance may be the best thing to do.

When you purchase a car from a dealer, the dealer may also provide the option of financing. Although, opting to finance your car from such dealers may not guarantee you security. Therefore, choosing private financing could be more beneficial. You are more likely to have a hassle-free experience if you choose to finance your car through a credit union or a bank.

Here are the pros of financing a car that will help you decide whether it is the right choice for you:

  • Helps manage the budget: The first and foremost advantage of a loan is that it lets you purchase a car without having to burn a hole in your pocket.
  • Fast loan approval: Getting a loan sanctioned is not a tedious process anymore. After all the necessary documents have been furnished, you can expect the loan disbursal in three to six days.
  • Option of EMI: Choosing a loan lets you repay the amount in Equated Monthly Installments (EMIS), thereby reducing the pressure of having to pay a huge amount in one go. The financer sanctioning the loan strategically spaces out the EMI and, the duration is increased depending on your ability to pay off the loan.
  • Choice of variable and fixed interest rates: Furthermore, you may conveniently decide between variable and fixed interest rates. In the case of a variable interest rate, the interest rate varies according to the changes in the market. However, a fixed interest rate remains the same for the entire tenure of the loan.
  • Tax deduction: If your new car will be used for business purpose, then you may qualify for tax deduction under the Income Tax Act.
  • Advantage of employing the residual value: The residual value may also be attached which could contribute towards decreasing the number of installments per month.

Consider the following cons, so that you are well informed prior to your car purchase:

  • High interest rates: High car loan interest rates in a loan could come in the way of gaining ownership of your dream car. However, financers now offer them at competitive prices and you could compare rates before your purchase.
  • Risk of financer repossessing car: Inability to pay at regular intervals puts you at the risk of losing ownership of your new car. So, ensure you keep a track of your repayment tenure and avoid a bad credit history.

Considering the flexibility and convenience of car loans, it is wise to choose this option when buying a new car. So, now you won’t have to delay the process of bringing home your new car. Being aware of the loan tenure and inspecting interest rates will help you avoid the risks, thereby facilitating a smooth buying experience.

Disclaimer: The blogger is solely responsible for all the posts, comments and mentions posted within this website. Mahindra Finance does not endorse the accuracy or reliability of any information’s, content or advertisements contained on, distributed through, or linked, downloaded or accessed from any of the services contained on this website, nor the quality of any products, information’s or any other material displayed, purchased, or obtained by you as a result of an advertisement or any other information’s or offer in or in connection with the services herein.


How to Choose the Right Used Car Loan Lender?

by Vinaya HS on August 29, 2016

in Finance

The following post is a sponsored post.

Most people turn to a finance option if they do not have outright cash required to purchase a pre-owned car. There are numerous factors that have to be considered while availing of vehicle loans. The most important step in the loan application process is choosing a lender. While selecting a lender, you must consider the following six factors:

1. Reputation of the lender

Always opt for a reputable and well-established lending institution. Such institutions are well-versed with the latest trends and schemes. They understand their customers’ needs and provide services to suit those needs. You should therefore check on a lending institution’s reputation and its professional lending experience.

2. Amount of loan offered

Not all lending institutions provide the entire sum that borrowers apply for. In case of used car loans, the borrower has to provide a certain percentage as down payment. This amount varies from lender to lender. Hence, it is important to select those lenders who approve a higher loan amount so that your down payment may be lower.

3. Interest rates

Usually, the interest rates for second-hand auto loans are slightly higher than that of new car finance. However, there are many banks and lending institutions that offer loans at attractive rates in order to draw more customers and increase their customer base. Take advantage of this benefit, and choose a lender who offers lower rates of interest. Low interest rates mean that you have to pay less for your car loan.

4. Borrowing costs

It is imperative to read the Terms and Conditions of repayment before signing on dotted line. Check for pre-payment charges, part-payment fee, processing fee, late payment charges, and loan cancellation charges, besides others. You need to have thorough knowledge about such fees and charges.

5. Repayment options

Used car loan seekers now have the option of customizing their EMIs based on their financial capabilities. Hence, choose lenders who offer such kind of flexible repayment options as it helps you adjust your repayment amount in case you have a surge in income or are cash-strapped.

6. Loan processing time

Some banks and financial institutions take a few days to approve used vehicle loans, while some take a couple of weeks. Based on your requirement of the loan, you may choose the right lender. If you wish to obtain a loan on an urgent basis, opt for a lender who offers faster processing time. Some lending institutions may also provide customers with the option of checking their approval status online thereby providing convenience to customers.

Finalizing on a particular lender may be a confusing task due to the array of options available in the market. Consider all the above-mentioned factors before you select your used car loan lender as it will help you avail of a pre-owned car loan conveniently.


How to Avail a Car Loan with Bad Credit Score?

by Vinaya HS on July 29, 2016

in Finance

Who wouldn’t want to drive around in a big fancy car of their dreams? But not everyone can afford it. Some of us may be trapped in a financial crisis which affect loan repayment schedules. This may in turn result in defaults, thus creating a bad credit history.

The Credit Information Bureau (India) Limited (CIBIL) assigns a credit score, based on an individual’s borrowing and payments towards loans and credit cards. Most Indian banks accept 750 as the minimum CIBIL score for individuals seeking a car loan. If you have a bad credit score, fret not. It doesn’t mean you can’t purchase your dream car. Though you may not have it easy like other car loan seekers, you can still get a loan.

The following tips will help you get an auto loan when the bank is frowning at your CIBIL score.

Buy a new vehicle instead of a used one

Usually, loans for used cars are more expensive than that of a new one. Hence, it is advisable to buy a new car if you do not wish to shell out extra money on loan interests. However, if you find a good deal on a used car, go ahead.

Know what’s on your report

Checking your credit report is critical as many auto loan seekers assume that their credit score is low and thus end up paying more. If you find any errors on your report like charge-offs or late payment charges, fix it immediately.

Research well

The next logical step is research. Conduct your research about loan lenders, car loan interest rates, etc. Approach selected lenders which have a greater chance of lending the loan. Each time an auto loan lender pulls out a CIBIL report, it creates a tag. Too many inquiries on the report may adversely affect the lenders decision.

Don’t go above your price limit

Setting a budget should be at the forefront while planning to purchase a car. The price you end up paying may increase due to interest payments, mainly due to higher rates of a bad credit loan. Hence, prepare a budget and stick to it. Auto magazines, car loan calculator, dealer’s websites and other resources could provide a true cost of the desired vehicle.


Though you may not be in a position to negotiate the terms of the loan, you can try to settle for the best possible price. Don’t pay more than your budget. Instead, try to lower the price if possible.

Look out for add-ons

Car buyers end up signing contracts which have many unessential add-ons like extended warranty, after-sales service, insurance, etc. These add-ons add up to the cost, thus raising the amount of the loan required.

Make regular payments

Once the loan is approved and you’ve purchased the car, make regular payments. Set up automatic payment options to help you pay the loan on time. Chances are the lender may repossess your vehicle should you miss a single payment.

Don’t let bad credit come in the way of buying your dream car. Plan well and research well before approaching lenders. Once you have shopped within your price range and made regular payments, you know you’ve made financially right decisions.

Know more about car loans and their interest rates at Mahindra Finance.

Disclaimer: The blogger is solely responsible for all the posts, comments and mentions posted within this website. Mahindra Finance does not endorse the accuracy or reliability of any information’s, content or advertisements contained on, distributed through, or linked, downloaded or accessed from any of the services contained on this website, nor the quality of any products, information’s or any other material displayed, purchased, or obtained by you as a result of an advertisement or any other information’s or offer in or in connection with the services herein.


Tips To Finance a Used Car

by Vinaya HS on May 23, 2016

in Finance

The following post is a sponsored post.

Purchasing a new car is the second most important investment an individual may make, next to buying a home. Some may not be in a financial position to purchase a new car and hence decide to buy a used car. However, getting a used car loan is much different than getting a loan for a new car. Lenders tend to disapprove loans for car which have crossed 4-5 years. Besides, the rate of interest charged on the loan is higher compared to new car loans.

Follow the below-mentioned tips to finance a used car.

Improve your credit score

Most banks check your credit score before approving a used car loan. This is the first hurdle while shopping for auto loans with competitive rates. If your credit score is low, take measures to improve it. Make regular payments in a timely manner. Keep low balances on credit cards and pay off pending debts.

If your credit score is not high enough to get an approval, seek the help of a co-signor. A co-signor with a good credit score can land a low-interest loan.

Research well

Different lenders have different rates for used vehicle loans. Usually rates on used car loans is 4-6% higher than new cars. Hence, research the rates well and solicit quotes from several lenders before deciding on a particular lender. It may also be worth buying a different used car to the one you first found if the finance option unavailable is unattractive.

Take a short-term loan

The term for repayment of a used car loan should ideally be short-term. The main reason for a shorter term is the rapidly decreasing value of the car. At the end of the loan tenure, the worth of the asset may be lower than the amount paid. Besides, shortening the term of the loan will ultimately help you save money.

Make a larger down payment

Based on your budget, see what percentage of the car’s purchase price works best as a down payment. A smaller amount will result in larger monthly installments or an extended loan tenure. Instead, make an approximate 20% down payment as it allows you to choose a shorter finance term and help you save money in interest charges.

Apply for finance through a used car dealer

Most dealers finance any used car they sell, regardless of its age. Hence, chances of a loan getting approved by a used car dealer is greater than that of a direct loan lender. However, rates of interest offered by dealers are greater than interest rates of direct loan lenders. Hence, applying for a direct loan should be your first choice.

Make smart negotiations

Negotiate the price of the car if your research states that you are not being offered a fair price. Go through the list of fees associated with the deal to ensure you are not paying unnecessary costs. Once the deal is closed, refuse any extra add-ons like extended warranty, car accessories, etc. You can always purchase the extras later after you have researched pricing.

Used car market in India is growing rapidly along with the growth of new car market. Savings made on purchasing a used car can be substantial given that a car’s value drops in the very first year when it’s on road. Always research various used vehicle loan options before finalizing on a particular lender. Beware of scams and unwelcomed surprises like hidden terms and conditions in the loan agreement.

Know more about used car loans and their interest rates at Mahindra Finance.

Disclaimer: The blogger is solely responsible for all the posts, comments and mentions posted within this website. Mahindra Finance does not endorse the accuracy or reliability of any information’s, content or advertisements contained on, distributed through, or linked, downloaded or accessed from any of the services contained on this website, nor the quality of any products, information’s or any other material displayed, purchased, or obtained by you as a result of an advertisement or any other information’s or offer in or in connection with the services herein.


How to Get Affordable Used Car Loans?

by Vinaya HS on April 19, 2016

in Finance

The following post is a sponsored post.

The demand for used vehicles and finance for these pre-owned cars has grown tremendously in India, making it one of the largest markets of its kind in the world. With increased disposable income and a growing upper-middle class, many people intend to purchase cars, but prefer to opt for used vehicles that can come for half the price.

Manufacturers and automobile dealers have caught on to the trend and many offer used vehicles with warranty coverage, as well as regular maintenance offers. You should consider all of these factors when planning to purchase a car. Securing a loan for such a purchase is also much easier today, as many lenders offer financing for used cars, because of their increasing demand.

Used car loans differ from new auto loans, as various factors need to be considered, while working out the financial intricacies of the loan. To make sure that you get an affordable used car loan, you need to consider the following:

1. Make sure of your loan eligibility

Salaried applicants must be at least 18 years old and a self-employed borrower must be 21 years. The maximum age of the applicant on loan maturity cannot exceed 60 years (salaried) and 70 years (self-employed). Salaried borrowers must be working at their present company for at least one year, while self-employed applicants must be in business for a minimum of 2 years.

2. Documents that you need to have

When availing a used car loan you will need to submit documentation for address and identity proof. Salaried applicants must provide the latest salary slip along with Form 16 for proof of income, while self-employed applicants must submit copy of their latest income tax returns.

3. Choose the type and model of the car

Applicants must choose the type and model of the vehicle as per their personal needs and financial situation. Most lenders take into account the age of the vehicle before approving the loan. Avoid purchasing a care that is very old to make it easier to get a used vehicle loan. Age of the vehicle will also affect maintenance costs.

4. Determine the amount

After choosing a vehicle, you need to determine the amount you will have to pay. If you are able to make a substantial payment towards your purchase, you can avail a smaller loan amount with affordable installments.

5. Set your requirement

Having understood the loan amount, you must calculate the tenure and the monthly installment. This will mainly depend on your income and calculation of future expenses.

6. Research the different options

Several institutions, such as banks and non-banking finance companies offer used vehicle loans. You can use an online calculator to research the different options and compare these to find the most affordable option

Applicants need to remember that the lenders will send an evaluator to analyze the condition of the vehicle. The lender will also assess the market price for the shortlisted vehicle before taking the final call on the loan amount and the other related terms and conditions.

The interest rate on used vehicle funding is higher as compared to loans for new automobiles. You need to analyze the higher cost before you apply for a loan to ensure you do not face any financial difficulty on account of the loan repayment.

Know more about used car loans and their interest rates at

Disclaimer: The blogger is solely responsible for all the posts, comments and mentions posted within this website. Mahindra Finance does not endorse the accuracy or reliability of any information’s, content or advertisements contained on, distributed through, or linked, downloaded or accessed from any of the services contained on this website, nor the quality of any products, information’s or any other material displayed, purchased, or obtained by you as a result of an advertisement or any other information’s or offer in or in connection with the services herein.


Update: I realized just yesterday that I’ve made a worse mistake: a BIG miscalculation in my income tax liabilities. Bummer! I’ll write about this in detail in the next post.

Having spent quite some time in thinking about my personal finance resolutions for 2011, I also spent some time reflecting upon what was perhaps my biggest financial mistake in 2010. You already know that I saved quite aggressively towards closing the loan on my Swift. But once done, I became quite lax in taking the next steps. I closed the loan on priority but completely procrastinated in getting the hypothecation removed from the Vehicle Registration and Insurance records.

I couldn’t have made as bad a mistake as this one. My Swift isn’t really mine until the hypothecation is canceled.

Too many things happened that led to such a situation.

To begin with, Axis Bank, from whom I’d availed the car loan, messed up in mailing the No Objection Certificates. They had my correct postal address on record but they managed to send the post to a wrong address. I waited for close to 2 months (since Axis Bank had quoted 45 days for the post to be dispatched) before I made a personal visit to their Regional Processing Center (whose location had changed since the time I pre-closed the loan). I discovered their mess-up only then. Thankfully, they had my certificates lying around in a cupboard. It’s vital that you keep the loan pre-closure receipt safe until you have the No Objection Certificates in your hand since that’s the only proof of payment you have.

The next couple of months were hectic since I was settling down at my new job and was also traveling around on personal and official trips. Come mid-December, it was already 4 months since I’d pre-closed the loan but the hypothecation was yet to be canceled. I should have prioritized this task and made time in-between, but I didn’t. Thankfully, the No Objection Certificates were valid for 6-months from issue — they’re generally issued with a 90-day validity.

It was only last week that I finally took my own advice. In a couple of days, my Swift will finally be mine. :-)

Lesson learned.

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When I pre-closed the loan on the Swift, there happened to be a small difference between my calculations and the bank’s calculations, with the bank’s figures being higher. I didn’t bother too much about it back then, but now I know the cause for that difference.

A 10.3% service tax levied on car loan prepayments.



I have a question:

In general, is it possible to make part prepayments (towards the outstanding principal) on your car loan? My specific situation: a car loan from Axis Bank that I intend to close by the end of this year.

If the answer to my question is a YES, how do I go about doing it?


The only debt I have is my car loan and one of my short-term financial goals this year is to get rid of this debt (I’m debt averse; D’s obsessively debt averse). That said, I do have a long-term financial goal where I want to fully pay for my next car in cash.

How do I even come close to doing that?

Here’s an effective strategy that I came across:

Once the loan on your present car ends, imagine that you’re still continuing to pay the EMIs (or a higher/lower amount based on your circumstances) albeit on a hypothetical loan whose tenure is equal to the expected life of your present car since purchase minus the tenure of the loan that you just cleared.

Depending on this tenure, you’ll need to save/invest the EMIs on the hypothetical loan in the appropriate financial instrument.

I went further and cooked up a “My Next Car Savings Calculator”. This calculator gives you a projected amount that you’d have at the end of the hypothetical loan.

What do you think?

Tip Tuesdays is my initiative to share practical personal finance tips — every Tuesday. I’d be delighted if you could share a tip or two from your own experiences. Drop a comment to submit your tip. And, as always, do spread the word if you find this useful.

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Assume that you’re looking out for a car loan and some bank offers you the following options:

  1. Rs 200,000 for 36 months at 9% fixed plus a processing fee of Rs 150, or
  2. Rs 200,000 for 36 months at 12.75% reducing balance.

Which of these two loan offers would you choose?

If you chose either of the options, without asking further questions, you’re wrong. The first one looks cheaper prima facie and is psychologically very appealing. The second one doesn’t say whether the interest rate is fixed or floating through the tenure. Both of them don’t say whether the EMI’s are in advance or arrears. This is where your level of financial awareness comes into picture. A loan that looks and sounds cheap most certainly isn’t so. I am aware of a recent incident where an expensive car loan masquerading as a cheap loan was pushed to a relative of a friend.

You should ask questions. Lots of them. There are no dumb questions in personal finance. It’s your money after all. And, your very first question to the bank should be to ask them for a complete loan amortization schedule for any option they quote so that you can compare firsthand the total interest component that you would be paying.

Awareness Fridays is my initiative to spread awareness on topics relevant to personal finance — every Friday. I urge you to take some time off and absorb this information — it’s pretty useful. And, as always, do spread the word if you find this useful.


Tweets on 2009-01-22

by Vinaya HS on January 22, 2009

in Finance

I’ve been working on improving a few Excel-based calculators that I have previously published. Specifically, I have improved the following calculators:

Let me know how I can further improve these calculators. What other calculators do you wish to see? I’ve received many requests for a Home Loan EMI calculator; I will shortly publish one. You can also download a Personal Loan EMI calculator [instructions for usage].


  1. Download my Car Loan EMI Calculator Excel workbook.
  2. This workbook has six sheets, one each for a loan duration ranging from one year to six years.
  3. Select the sheet corresponding to the loan duration you’re thinking of. For example: select the sheet labeled “4 Years” if you’re looking for a car loan that you want to repay in 4 years’ time.
  4. You will now find three cells highlighted in yellow — one for the loan amount, one for the interest rate, and one for the type of EMI payment. You need to provide your inputs in these three cells. Note that changing the data in one sheet will not affect the other sheets.
  5. The workbook automatically computes your Car Loan Amortization Schedule.
  6. You can now Save/Print this sheet for your reference.

Let me know if you’re facing any difficulty. Drop a comment if you find this calculator useful.


In October, I paid the final EMI (Equated Monthly Installment) on my car loan from ICICI Bank. Back then, I wasn’t sure about the steps to be followed next. Now that I have figured out what exactly needs to be done once you’ve paid off your car loan, I thought I’d document it here.

Step 1

  • Ensure that you have received all the canceled post-dated checks that you had issued to the bank/finance company when you took the loan. I received these on time — through courier — from ICICI Bank.

Step 2

  • Ensure that you have received the No Objection Certificates (NOCs), one addressed to the Regional Transport Office (RTO) where your vehicle has been registered and one addressed to your insurance company. I didn’t receive these certificates from ICICI Bank until I reminded them to do so (over the phone). The NOCs are normally valid for a period of 90 days from the date of issue.

Step 3

  • Take a photocopy of all the above documents — just to be safe — and keep them locked at home. I forgot, but luckily things progressed without a hitch.

Step 4

  • Ensure that you have the original and a photocopy of the following vehicle documents ready: Certificate of Registration (popularly called “The RC Book”), insurance certificate, lifetime tax paid receipt, and emission certificate (last two are optional, but you can never guess what’s required at the RTO).

Step 5

  • You need to first get the hypothecation/lien registered in the RC Book canceled at the Regional Transport Office (RTO) where your vehicle has been registered. I’d advise you to get this done through a reputed driving school since they do all the cumbersome legwork and form filling for a fee. The driving school will need the NOC (addressed to the RTO), original RC book, and a copy of the insurance certificate, lifetime tax paid receipt, and emission certificate.

    Call it outsourcing, if you must, but you’ll get the updated RC book — with the hypothecation canceled — within a day or two.

Step 6

  • Now that you have the hypothecation canceled in the RC book, it’s time to hit the insurance office. Do remember to take the NOC (addressed to the insurance company), a photocopy of the updated RC book, a photocopy of the insurance certificate, and the originals (in case they need to verify). The insurance company will update their records and issue a letter stating that the hypothecation has been canceled. Staple this letter to the original insurance certificate.

That’s it! It shouldn’t take you more than four to five days to complete these procedures. Good luck and feel free to pass this information around.

I’d love to hear your feedback too.

Related post(s):


In a recent notification, the Reserve Bank of India (RBI) has noted that

It is understood that some banks are furnishing a copy of the loan agreement only on request made by the borrowers. In this connection, we advise that not furnishing a copy of the loan agreement or enclosures quoted in the loan agreement is an unfair practice and this could lead to disputes between the bank and the borrower with regard to the terms and conditions on which the loan is granted.

The RBI has therefore directed all Scheduled Commercial Banks and Financial Institutions to

…invariably furnish a copy of the loan agreement along with a copy each of all enclosures quoted in the loan agreement to all the borrowers at the time of sanction / disbursement of loans.

While the RBI does a decent job of posting such notifications on its website, it’s certainly not the most effective way to reach the intended recipients – the people who take the loans. After all, how many among you take time off every week to read up on the RBI’s website?

Maybe it’s time the RBI started a consumer-education initiative; a weekly front-page column in a few leading newspapers should be a good start. What do you think?

Previous issues of Know Your Rights:

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Public Service Announcement

From a recent RBI circular:

Guidelines on Fair Practices Code for Lenders

Earlier, Banks/FIs were advised that loan application forms in respect of priority sector advances up to Rs. 2.00 lakhs should be comprehensive and should include information about the fees/charges, if any, payable for processing, the amount of such fees refundable in the case of non-acceptance of application, pre-payment options and any other matter which affects the interest of the borrower, so that a meaningful comparison with that of other banks can be made and informed decision can be taken by the borrower.

The RBI now says:

With a view to achieving greater transparency and in the light of experience gained, it has been decided that the above instructions will be applicable to all loan applications in respect of all categories of loans irrespective of the amount of loan sought by the borrower.

Banks/FIs were so far advised that in the case of small borrowers seeking loans up to Rs. 2.00 lakhs the lenders should convey in writing, within stipulated time, the main reason/reasons which, in the opinion of the Bank/FI have led to rejection of the loan applications.

The RBI has amended that to:

On a review, it has been decided that in case of all categories of loans irrespective of any threshold limits, including credit card applications, Banks/FIs should convey in writing the main reason(s) which, in the opinion of the Bank/FI have led to rejection of the loan applications.

Necessary modifications in the Fair Practices Code based on the above instructions, with the approval of the Board, should be carried out by April 30, 2007. The modified Fair Practices Code should be placed on the Bank’s/FI’s website and also given wide publicity.

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