A car is one of the most cherished items that every individual dreams about and in today’s day and age, owning a car is easy.
A car is not only a symbol of mobility, convenience, and independence but a necessity as well. With easy access to car loans, owning a car has become much more easy and affordable to individuals.
By understanding the advantages that come with car loans, individuals can make informed decisions to achieve their mobility goals while maintaining their financial stability.
In this article, we will discuss the benefits of a car loan, if you’re considering buying a car or simply want to understand how car loans can work in your favor, read on to discover the myriad benefits waiting for you on the road ahead.
Car Loan Interest Rates in India 2023
The following are the car loan interest rates in India-
|Canara Bank||7.30% – 9.90%|
|Bank of India||7.35% – 7.95%|
|ICICI Bank||8.82% – 12.75%|
|Indian Bank||8.20% – 8.55%|
|Union Bank Of India||7.40% – 7.50%|
|Punjab National Bank||9.40% – 9.90%|
|Central Bank of India||7.25% – 7.50%|
|IDBI Bank||8.40% – 9.00%|
|HDFC Bank||8.80% – 10.00%|
|Corporation Bank||7.40% – 7.50%|
|State Bank of India||7.95% – 8.70%|
|UCO Bank||7.70% – 9.30%|
Benefits of Car Loan
The following are the benefits of the car loan-
Acquiring a car loan significantly improves the affordability of purchasing a vehicle. Cars often require a substantial financial investment, and not everyone has the available funds to purchase the car.
Car loans allow you to divide the total cost of the vehicle into affordable monthly payments, making it easier to budget and plan your finances.
You can take various loan options that can cater to different financial situations, providing flexibility in terms of interest rates, down payments, and loan durations to suit individual needs.
Car loans typically require a lower initial down payment, of 10-20% of vehicle value, making it more accessible for many potential buyers.
Enhanced Purchasing Power
Car loans enhance purchasing power by providing access to a broader range of vehicles. Instead of being limited to purchasing a car within your budget, you can extend your budget further with a loan.
Car loans allow you to consider a variety of vehicles, including those with advanced features, better fuel efficiency, or enhanced safety measures.
With a car loan, you can opt for a newer or higher-tier vehicle that might have been unaffordable without a loan.
The increased purchasing power from a car loan ensures that you can choose a vehicle that aligns better with your lifestyle, preferences, and requirements.
Establishing Credit History
Taking out a car loan and successfully managing its repayment can help you in increasing your credit score. A strong credit history is essential for future financial endeavors, such as purchasing a home or obtaining favorable interest rates on loans.
Timely payments on your car loan demonstrate responsible financial behavior, which is reported to credit bureaus and positively impacts your credit score.
A good credit score opens doors to better loan terms, lower interest rates, and increased credibility in the eyes of lenders, improving your financial prospects.
Guidance on managing a car loan responsibly to enhance your credit score, including paying on time and understanding the impact of missed payments.
Tax Benefits and Incentives
Car loans come with potential tax benefits and incentives, which can further improve the overall cost of owning a vehicle.
The interest paid on your car loan can be tax-deductible, reducing your overall tax liability and making car ownership more financially appealing.
Depending on your location and the type of vehicle you choose (e.g., electric car or hybrid), you might be eligible for tax credits like GST Car Claim, providing a financial incentive like an Electric car incentive.
Flexibility in Repayment
Car loans offer various repayment options, providing borrowers with flexibility in tailoring their repayment schedules to suit their financial capabilities.
Car loans can be structured with different repayment schedules, including short-term or long-term options.
Structuring loans with longer terms can result in smaller monthly payments but higher overall interest and shorter loan tenure will result in higher monthly payments but less overall interest payment.
Yes, you can choose the length of the loan term. Structuring loans with longer terms can result in smaller monthly payments but higher overall interest and shorter loan tenure will result in higher monthly payments but less overall interest payment.
In case of car loan default, you’ll be provided with few warnings and you’ll have to pay the car loan within that warning time otherwise, the bank will confiscate your vehicle and put it in an auction. This will also result in lowering your CIBIL Score and getting a future loan will be difficult.
Yes, you can pay off your car loan early by paying a premature closure penalty along with the remaining principle.
It depends on your overall profile and the total income you own, the bank may consider your profile with a bad credit score but due to the high risk of granting the loan, you may have to pay a higher interest rate.