Role of Downpayment in Car Loan

Car Loans are schemes offered by Banks and Financial institutions through which people can borrow a certain amount of money to buy a Car. Car Loans are secured loan policies, unlike Personal Loans, which can also be used to buy a Car. For Car Loans, the Car is usually used as collateral security by the lending organization. Thus, no existing asset of the borrower/applicant is required for the application process of Car Loans.

The Car Loan Interest Rate offered by Banks, and Financial institutions in India generally is 7.25% per annum upwards. The Loan tenure for Car Loan repayments is usually between 1 and 8 years. The processing fees that are applicable for the application process for Car Loans depend upon the Bank or the Financial institution you apply to.

There are many popular Car Loan schemes available in the Indian financial market. Some of these popular Loan schemes include:

i. State Bank of India Car Loan
ii. Axis Bank Car Loan
iii. Bank of Baroda Car Loan
iv. Bank of India Car Loan
v. Canara Bank Car Loan
vi. ICICI Bank Car Loan

Eligibility Criteria for Car Loan applications:

Banks demand certain eligibility criteria to be fulfilled by the applicant for the application process of Car Loans. These eligibility criteria in general are:

i. The applicant’s age should be at least 18 years and below 75 years.

ii. The applicant should have a minimum net monthly income of INR 20,000.

iii. The applicant should be employed or self-employed for at least the past one year.

iv. The applicant should be either employed by a private or government organization or self-employed.

v. The applicant should have an optimum credit score.

These are the eligibility criteria that are required to be fulfilled by the applicant for the application of Car Loans. You can use a Car Loan EMI calculator to determine the monthly EMI that you need to pay back to the lending organization during the tenure of your Car Loan. The requirements for the use of these Calculators include the Loan Amount, Loan Tenure, Rate of interest applicable, and processing fees being charged.

Documents required for Car Loan applications:

The following documents are required for the verification process involved in the Car Loan application process:

i. Proof of Identity of the Applicant
ii. Proof of Income  
iii. Proof of Age
iv. Proof of Address
v. Few Passport-sized photographs of the Applicant

Certain extra documents may be demanded by the Bank or the Financial institution you apply to based upon the policies of the organization.

The Cash amount that is paid while purchasing a Car by the applicant of a Car Loan is known as a Down Payment. This is usually paid with the savings of the person buying the Car. This payment can also be made via cheques, drafts, electronic payments options, etc.

The more amount of Down Payment you pay, the less amount of Car Loan you would be required to pay back during the tenure of your loan. A higher down payment would reduce your pending loan amount, monthly EMI repayments, and the rate of interest applicable to your pending loan amount. Banks, in general, reject the Loan applications for which the applicant is willing to pay no or a very little amount as a Down Payment.

Down Payments can help you in reducing your financial burdens in the future. Also, down payments help you in maintaining your credit score at an optimum amount. You would be eligible for a lower rate of interest as you borrow a small amount because of the high amount of Down Payment. Down payments can be of great help to the Loan borrowers as they decrease the chances of default for the Loan. It is a good idea to pay a huge amount upfront during the purchase of your car as it helps in stabilizing your future expenses.