Loan Against Car: How can your car help you take a loan? | The Financial Express

Loan Against Car: How can your car help you take a loan?

A loan against a car is a secured loan where your vehicle serves as collateral for the funds.

Loan Against Car: How can your car help you take a loan?
The loan process is quick, making it an ideal option to use during an emergency.

A car is a depreciating asset. You might have heard this multiple times, but did you know that your car can also help you obtain funds in an emergency? A loan against a car is a product you can avail of to get funds during hard times. Banks sometimes also offer better terms, such as minimal documentation or faster processing, on such loans to select customers.

Here are a few important things you must know about a loan against a car.

How does it work?

A loan against a car is a secured loan where your vehicle serves as collateral for the funds. The loan process is quick and hassle-free, making this product an ideal option to use during an emergency.

Which cars can be financed?

The bank will assess the vehicle as part of the approval process for this type of loan. Vehicles that are stolen or don’t have necessary government approvals will not be considered for assessment. Loans applied for against cars or car models that have been discontinued may be rejected.

How much can you borrow?

To decide the loan amount, lenders consider additional factors, such as your income, existing loans, and credit history. Typically, the loan amount constitutes 50% to 150% of the car’s value. The loan tenure ranges from 12 months to 84 months, sometimes longer. A processing fee of 1% to 3% may also be charged.

What can the funds be used for?

Similar to personal loans, there are no restrictions on what this loan can be used for. The funds can cover various expenses such as weddings, children’s education, medical treatment, or during an emergency.

Also Read: 3 things to do to avoid delays in paying EMI or credit card dues

Where can you apply for it?

Many lenders, online and offline, now offer loans against cars. Find banks that offer this type of loan, enquire about the loan terms, and settle with the lender offering you the best terms. Adhil Shetty, CEO, Bankbazaar.com, suggests, “Visit the bank’s website to find out the documents you need and keep them ready when applying for the loan. It is advisable to apply with a bank/ financial institution where you have an existing salary account or loan, as they already have your records. But don’t let that limit you. Go with the bank or financial institution offering you the best deal.”

How is valuation done?

The valuation process for this type of loan may vary from lender to lender. Some lenders can be particular about the car valuation and verification process. However, in the case of a pre-approved offer, the lender may do a basic valuation and verification before disbursing the loan.

Will the lender take the car?

Under this type of loan, the car is only used as collateral. You can continue using your car as long as you pay your EMIs on time. In most cases, no other form of security is required towards the loan. However, if you default on your loan, the bank has the legal right to seize your car.

However, before applying for a loan, you must compare the interest rates and repayment terms that different lenders are offering. Also, choose a repayment tenure that you are comfortable with. Don’t rush into the deal. Take your time to decide what’s best for you.

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First published on: 28-11-2022 at 00:15 IST