Whether you want to buy a car for your personal requirements to for business purpose, it is always an expensive proposition. Whether it’s a sedan, or an SUV or a car for utility purpose, it is always a burden on your pocket. It is very difficult for an individual to buy a car from his savings. Also, it is not logical to exhaust your hard earned savings for a car. So, what’s the alternative? The answer lies is getting your car financed from a third party and pay the amount in monthly installments over a period of time. This way, you can afford a card you always wanted have and at the same time is financially viable. A car loan can be borrowed from banks or financial institutions. Certain top segment car manufacturers have their own finance options available, many of which are highly attractive and easy to pay back.
Loans For Personal Use Cars
One segment of car loans is the finance to buy a car for personal use. The loan tenure could range from 3 years and up to 7 years, depending upon your financial requirements. The car that is financed is hypothecated with the car finance company and the ownership is transferred upon repayment of the entire outstanding amount.
Loans For Commercial Cars
You might want to start a business of car rentals, or you have an existing business and require more number of cars for business expansion. The best option is to borrow a loan for buying a commercial vehicle and pay the loan amounts from your future earnings.
Car Loan Refinancing
It is also possible that one has a car which has no outstanding loans or a loan amount which is much lower than the car’s current value which is derived after discounting the depreciation value. It is possible to borrow a loan on such cars. In case of a car with no outstanding loan, finance options are available either through a mortgage or an overdraft facility. In case where there is outstanding loan, but the car’s value is higher than the outstanding loan amount, a top-up option is available An additional amount is financed in this case and is added to the existing loan amount.
Generally the loan is repaid through an installment option known as EMI or equated monthly installment. The loan amount at the time of loan disbursement and the future interest amount are added and the total amount is divided by the number of months for which the loan has been financed. Every EMI has two components, the principal outstanding amount and the interest amount. At the inception of the loan, the interest component of the loan is higher and reduces with every successive EMI. Simultaneously the principal component increases with each EMI and are the lowest at the inception. In any case the EMI value does not change and remains constant throughout the loan tenure. Calculation of EMI is based on a complex formula and considers the loan amount, interest rate and the loan tenure.
Many finance companies also offer part payment and foreclosure options, where the outstanding amount can be paid partially or totally anytime during the loan repayment tenure.