These days getting an automobile loan is quite easy. Organized and institutional auto finance has come of age and companies are aggressively marketing auto loans schemes by offering innovative and tempting offers to the customers.
Most of the lending institutions finance up to 90% of the cost of the car, depending on the model of the car and the repayment period. |
Types of Automobile
Loans
We are explaining some of the popular loan schemes.
Select a scheme that suits you best.
- Margin Money Scheme:
Under this scheme, you are required to pay margin money of at
least 10% of the total loan amount, along with one EMI. The
balance amount is paid through post-dated cheques, which are
issued for the balance EMI's covering the remaining period. With a
repayment term of one to five years (in some cases seven), the
Margin Money Scheme is the most sought after. One of the major
advantages of this scheme is that it has lowest EMI to be paid,
compared to other schemes for the same amount of loan.
- Advance Equated Monthly
Instalment Scheme:
This scheme offers 100% loan. You
have to pay up to five EMIs in advance and the balance is paid
through post-dated cheques covering the remaining period of the
loan. One of the downsides of this scheme is that though it offers
100% finance, you need to pay five to nine installments up front.
Besides, you go on to pay a higher EMI amount because the interest
is charged on the entire loan amount.
- Security Deposit
Scheme:
Under this scheme you are required to deposit a
specified sum as security deposit against the amount provided as
the loan. This security deposit is refundable on completion of the
full period of the loan. You will receive interest on the deposit,
which in most cases is lower than that charged to you on the loan
amount. The EMI under this scheme is higher than the EMIs under
the above two schemes. The security deposit ranging from 10-30% of
the total is returned after the loan period. The deposit also
earns a simple or compound interest, the tenure lasting for two to
five years.
- Hire Purchase Scheme:
This is an agreement under which the car is let on hire and
under which the hirer has an option to purchase the car in
accordance with the terms of the agreement. Hire Purchase
agreement is mostly offered by Non Banking Finance Companies.
Broadly this option works similar to the loan option. NBFCs
usually charge an amount as low as One Rupee, called Option money,
on payment of which the car passes on to the hirer. The NBFC's
have taken to this option, as they are not encouraged to give
loans, which is a Banks privilege.
- Lease Financing
Purchase:
Lease is a contract between the owner of an
asset (the Lessor) and its user (the Lessee) for the hire of that
asset. The ownership rests with the lessor while the right to use
the asset (car) is given to the lessee for an agreed period of
time in return for periodic rental payments by the lessee to the
lessor. Lease agreements are offered by NBFC's and are mostly
availed by Corporates looking at it mainly from tax saving angle.
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