Things you should know about a loan against car

Gunjan thakurMarch 19, 2022

Do you require emergency funds but do not own a residential or commercial property and you do not want to apply for a personal loan either? If you own a four-wheeler, there can be a solution in this case. You can get a secured loan by keeping your car as collateral or security with the lender. This loan involves an easy process. Read on to know important facts about loan against car and how you can benefit from it.

The benefits of a loan against a car include the following:

• You will get quick loan disbursal if you fulfil the eligibility criteria
• The rate of interest for a loan against the vehicle is competitive
• It would be a totally paperless procedure if you apply online
• You can use it as a top-up loan on your existing car loan that can go up to 150% of the value of the car, offered by some lenders. For this, you need a no-default record for a minimum period of time
• You do not require any guarantor for a loan against car
• Lenders provide this loan on almost all cars except some models which are out of production now
• The repayment tenure can be from one year and extend up to 5 years as offered by some lenders
• If you are a privileged client of the lender, you may get pre-approved offers from him. These include very quick loan processing and a minimum number of documents

Before finalizing a lender, take some time to do a bit of research online or offline and compare the loan terms and conditions, interest rates, etc. You should preferably choose a reputed lender to avoid any hassle associated with the loan later on. You will find several lenders offering loans against a vehicle with almost similar terms and conditions as below:

• The car has to be registered in your name
• The lender would take the help of an expert to determine the current market value of the car
• Your loan would get approved only after valuation and verification is done by the lender on the basis of the details that you provided
• The value of your car and the tenure of the loan depend on the car manufacturer, the model, the age of the car, and whether you have an ongoing car loan.
• Most lenders would offer loans up to 85% of the value of the car
• If a lender approves your loan application, then he is the official owner unless you repay back the entire amount
• In some cases, the lender can charge you a penalty if you repay the entire amount before the loan tenure is over
• You should have a regular source of income from a job or your own business and a good credit score
• Your earnings should be sufficient to repay back the loan
• Most lenders would prefer the car to be less than five years otherwise your application may get rejected
• The car model should be manufactured and available in the market during submission of the application as lenders do not consider discontinued models
• The minimum age to apply for this loan is usually 21 years and the maximum age is 65 years, but these age limits may differ between lenders
• For loan against second-hand cars and conditions related to Finance used car on EMI, the eligibility criteria may be different

You have to submit certain documents either in hardcopy or softcopies depending on your mode of application. The lender would verify these documents as proof of your declaration. The required documents include

• Your identity proof such as voter ID, PAN card, passport, etc
• You can submit your identity proof as to your age proof also
• A proof of income which can be your salary slip, account statement, and Income Tax Return (ITR)
• Your address proof consisting of the telephone bill, passport, ration card, etc
• The car documents include your driving license, car registration document, car insurance document, etc.

A loan against car is a convenient way to arrange for quick funds in case you are under financial stress. However, compare the offers by different lenders to get a good deal. Also, go through the eligibility and documents required, so that you can maximize your benefits.