How can you fight car loan woes?
In an hour-long chat on rediff.com on Wednesday, personal finance expert and apnaloan.com CEO Harsh Vardhan Roongta answered many such readers' queries.
Here is the transcript:
Harsh Roongta says, Hello and Welcome everyone. Without any further Ado let's get started.
jaydeep asked, Hi , I'm ready to pay down payment of 1 lack for buying Chevroley UVA ( Cost 4.88 L) , would take loan for 42 months ; what sud be the best rate and option pl ?
Harsh Roongta answers, at 2007-11-20 15:04:19Published car loan rates can be a misnomer since a lot of freebies are in-built into a typical car purchase. Rather than comparing the absolute rates, it is recommended that the car buyer examines the actual rates (after factoring in the cost of freebies). At Apnaloan we have gathered the car loan rates of some banks, which will give you an indication of prevailing rates. However the actual rates applicable to you will be much lower depending on the discounts that are factored into the interest rate. Click on this link to access the indicative car loan rates. http://www.apnaloan.com/car-loan-india/rates.html Also this link giving details on how to negotaite the best car loan rates should be useful. http://www.apnaloan.com/articles/car-loan-india/car_loan_best_rates.html
Ratan asked, If buyer having an existing loan car or house does this serve as a factor to decide interest rate being charged to customer?
Harsh Roongta answers, Yes. A good track record on the repayment of the existing loan will ensure that you get a better deal for the proposed car loan. However the fact that a portion of ypour income is already earmarked for repaying an existing loan could possibly reduce the amount of car loan that you would be eligible for. In any case the bank will have full details of your repayment track record from the credit bureau and hence this should be fully disclosed to the concerned lender.
umeshvr asked, i have taken up a loan of 2lakhs @9.5% and have almost completed half the tenure and i have about 2L in my fixed deposit in case of any emergency(6months renewal which is earning 7.5%roi) suggest me should i pick 1L from fixed deposit and clear the loan will i benefit from that
Harsh Roongta answers, As a rule of the thumb any money that you do not need for a rainy day and can spare should go towards prepaymnet of all loans (with the possible exception only of home loans in some cases). Even if the prepayment charges are high (normally 3-5% in the case of car loans) it might still make sense. More specific advise can only be given after considering all the facts by your personal finance advisor.
Nair asked, Does banks provides loan for used cars
Harsh Roongta answers, Most bansk (including quite a few public sector banks) provide loans for purchasing used cars. An indicative list of rates is given on this link. http://www.apnaloan.com/car-loan-india/rates.html
DP asked, which Bank is good for car loan for low interest rates, is there any other carloan type other then Fixed one & how is it beneficial?
Harsh Roongta answers, Please see the indicative list of interest rates by banks. As already answered in response to an earlier query you should follow a seven step process to get the best car loan deal for yourself. http://www.apnaloan.com/car-loan-india/rates.html http://www.apnaloan.com/articles/car-loan-india/negotiating_tricks_car_loan.html
DP asked, which Bank is good for car loan for low interest rates, is there any other carloan type other then Fixed one & how is it beneficial?
Harsh Roongta answers, You also get floating rate car loans. At Apnaloan.com we advise our consumers to avoid going in for these kind of loans due to the detailed reasons mentioned in the enclosed link. http://www.apnaloan.com/articles/car-loan-india/floating-car-loan.html
Murali asked, What is the maximum tenure for car loans? and can i avail car loans for seconds hand cars?
Harsh Roongta answers, For new car loans it is 7 years. for used cars the tenure will be such that the age of the car at the end of the loan tenure should not exceed 7 years. So if a car is 3 years old you may possibly get a 3-4 year loan.
Ranjit asked, Hello Mr. Roongta, Is it better to go for a personal loan for purchasing a Car instead of going for a normal auto loan. Because Personal loans are now available at 12%-16% for corporate users.
Harsh Roongta answers, Most car loan rates will be lower than personal loan except in some very stray cases. So it should normally be better for you to go in for a car loan.
hi asked, my monthly salary is 15000 i want to buy a santro kindly advice which car loan shuld i take from which bank?
Harsh Roongta answers, You can look at going in for a 7 year loan (or lower tenure if you are confident of meeting the larger monthly EMIs for a smaller tenure). AS to which bank your best bet is to get the banks to compete for your business. You can also use market places such as Apnaloan.com to get competitive offers. Also the best way to negotiate your car loan is given in this link. http://www.apnaloan.com/articles/car-loan-india/negotiating_tricks_car_loan.html
Jai asked, Hello Sir, I have a question on buying a used car. If the seller has a car loan active, is it possible to tranfer the loan to the buyer ? What are the charges ? Or it it better for the buyer to avail fresh loan for the used car ?
Harsh Roongta answers, There is no question of a loan transfer. The seller will have to clear off the loan and you will need to take a used car loan to fund your purcahse.
qwerty asked, Hi Harsh, I have been living abroad for 5 years and returned to india right now, would i be able to get thecar loan ? 1.are there any documents i need to get from my previous employer. 2.are there any packages available. How should i go about it Thanks
Harsh Roongta answers, This should be possible. I am assuming you are an Indian Citizen and will be able to provide necessary proof for your current and permannent address in India and be willing to pay a slighly higher downpayment amount. If you are from a country that had a credit bureau you can apply to any bank that has a branch in that country and they may be better able to help you as they will pull a credit report from that country's credit bureau.
Kaladharan asked, Hi, Why tax exemptions for car loans is not applicable for salaried persons?
Harsh Roongta answers, The dedcution for interest is only available if you use it for the purpose of a business or profession. The only exception is a loan taken to buy a house property or a loan taken for the purpose of defined higher education for self, spouse or children.
samjd17 asked, hi harsh............. I want to take a loan for a used car. This car comes in the antique caegory... Will banks finance.
Harsh Roongta answers, Very unlikley.
Hari asked, What is the intrest rate for a 5 Year old used cars?
Harsh Roongta answers, I dont think any bank will provide finance for buying a 5 year old used car.
Nag asked, My Salary is around 40K and Iam paying 20K EMI for home loan. what could be the amount of loan I can get to buy a car ?
Harsh Roongta answers, Before you take that you need to do a bit of financial planning as to where the living expenses are gouing to come from. You have already reached the safe limit of 50% of your income towards loan servicing so unless you have some other sources of living expenses you should reconsider whether you should take a car at all. That is not to sya a car loan will not be available. It may still be available especially if you are willing to pay a higher downpayment amount and the track record of payment on your home loan is excellent.
abhijit asked, Apna loan should publish speciifc formats for the important documents such as NOC, Possesion letter ?? or Do you ahve it published already ??
Harsh Roongta answers, That is a good suggestion. we currently do not have it but will work on meeting this need.
heeren asked, i had took loan for around 50% for new car from bank, rest i had paid in cash. so in case i am not able to pay loan will the car be completely considered as banks because it is hypothecated by bank?
Harsh Roongta answers, If you default on the loan repayment the bank has the right to repossess the car and sell it off to recover its money. However any surplus money after adjusting all their dues will have to be refunded to you and cannot be retained by the bank.
ajinkya asked, i am planning to buy maruti swift(6 lakh) what will be EMI for 3 years tenure
Harsh Roongta answers, For standard interest rate see the interst rate link on Apnaloan. http://www.apnaloan.com/car-loan-india/rates.html Using the interest rates there you can work out an indicative EMI by using this calculator link http://www.apnaloan.com/loan-advice-india/emi.html
AKP asked, I got car loan @7% in 2005 now ICICI is asking for 5% on proncipal for foreclousure. IS it asper the terms and condition, recently high court / counsumer court has opined aginst charging foreclousure charge.
Harsh Roongta answers, This also answers SV's question. Please read the car loan agreement or the sanction letter that you have signed with the bank to check what is the prepayment charges mentioned therein. If, like most other consumers, you do not have a copy of either you can demand a copy of the same from the bank. If they do not provide the copy within 2-3 weeks of your formal request you can complain to the banking ombudsman. (details of banking ombudsman on www.rbi.org.in). But if the agreement/sanction letter clearly mentions 5% as the pre-payment
charge than i think it might be difficult for you to get any relief unless you intend to take the legal route which may be time consuming and expensive. Also if this fact was clearly conveyed to you at the time the loan was taken I personally think the bank is fully justified in charging the pre-payment charge. Charging of pre-payment charge has a rational economic basis as long as the fact was clearly conveyed to teh consumer at the time the loan was disbursed and not hidden away in the fine print.
RashidMumtaz asked, Hi, Harsh I want to buy a used car. Can you tell me any Zero Percent bank loan available if yes then which bank as I cannot go for interest based loan. Thanks in advance
Harsh Roongta answers, No bank will give a zero percent loan. Even if you do get a deal which is supposedly "zero percent" very clearly the cost of that is built into the price of the product either as a discount that you forego because you did not pay cash or as an enchanced price. See this link for a more detailed note.. http://www.apnaloan.com/articles/credit-card-india/creditcardarticlebuynowregretlater.html
abhay asked, i want to purchase wagorn R (4 lacks) 2 lacks down payment and want 2 lacs loan, my age is above 65. i am elegigle or not for loans.
Harsh Roongta answers, Most banks will not give a car loan unless you get a younger person to be a co-borrower or guarantor. This co-borrower needs to have independent and verifiable income of his own.
vgupta59 asked, Is there a logical reason for banks charging exorbitant rates for used car loans (as compared to new car loans) or are they just ripping off the customers.
Harsh Roongta answers, Part of the reason is the increased risks associated with a used car versus a new car. The second part also is that there are no freebies thrown in along with a used car (unlike the new car) and hence the rate that banks charge is also what the consumers actually end up paying.
Solomon asked, My salary is 2.5 lakhs per annum? Can I afford to go for a car loan?
Harsh Roongta answers, I think you should decide whtehr you can afford to go in for a car. The car loan is only an means to an end. You need to take inot account your current income, assets, liabilities, possible expenses in the future, your future income, etc. before taking this desicion. A good rule of the thumb is to do a back of the envelope calculation nwhether you acn afford to maiantain a car (petrol, insurance, repairs and servicing, etc.). If you can then you should seriously evaluate whther you are in a position to buy a car (whether used or new).
nd_adi asked, I am going for a used car loan(Maruti 800,2004) and I would like to know if my rate of interest is @ 28% on reducing balance,what would be the flat rate of interest for the same and can u pls give me the difference between the two with an example as I am going for a personal loan as well and i am a bit confused. regards, Dinesh
Harsh Roongta answers, reducing balance of 28% is far too high under any circumstances. Please make some more efforts (you can also approach market places like apnaloan.com which makes the banks compete for your loan) to get a better deal. Flat rates are meaningless rates and the only reason any person quotes them is becaise they are ashamed to tell you teh effective rate of interest. Use the EMI calcualtor on the apnaloan site to work out your interest rate. http://www.apnaloan.com/loan-advice-india/emi.html
HarishRoongta asked, My sal is 3L per month and I want to buy a Audi. Which Bank will give me loan ?
Harsh Roongta answers, Almost any bank will give you a loan provided you make the down payment (about 10-20%) and are able to provide the necessary proof of income.
YP asked, I have taken loan from icici for my alto lxi and have paid almost 20 instalments of 5592 for a loan of 275k. now i feel i need to go for a bigger car. how do i proceed and is it viable to pre close the loan account where 190k is the outstanding principal
Harsh Roongta answers, I think your desicion should be whether you should dispose off the old car and buy the new car. add the pre-payment charge to the cost of ownership of the new car and do a working accordingly.
sanjaymasiwal34 asked, my salery is 1 lac per month need a loan amount of 85% for 5 yrs now tell me which bank should i go
Harsh Roongta answers, This answers a lot of questions about bwhich banks to go to for a car loan. The answer is go to the bank that gives you the best deal. Contrary to popular opinion there is no one single answer to that question. If there was how do you think the other bank are doing business. The broadly indicative rates are given on this link. http://www.apnaloan.com/car-loan-india/rates.html for the way to negotiate the best deal ensure you ahve at least 2-3 banks in your consideration set. After that use the steps outlines in this link. http://www.apnaloan.com/articles/car-loan-india/negotiating_tricks_car_loan.html
Girish asked, I wamt to buy car, my monthly income is 15,000/- , very crazy abt cars, is it possible to take loan.
Harsh Roongta answers, You should think long and hard about affordability (not just purchase but maintaing the car as well).
suman asked, I will get 4800 per month from my company so I want to fit my EMI TO max 4800/month. As a downpayment I can pay 50,000. I don't want to buy Marutu 800 or Alto. wHAT IS THE OTHER ALTERNATIVE
Harsh Roongta answers, based on your constraint of EMI at 4,800 you are looking at a loan amount of around 2,75,000 for 7 years. Add the downpayment of Rs. 50,000 and you will need a car costing around Rs. 3,25,000/-
sajith asked, Sir, I have a car which is on Loan (icici). I would like to buy a new car. I want to know if it is possible to shift my current loan to the new car loan (transfer).?
Harsh Roongta answers, That is not possible. You will need to pay off the existing loan amount (inlcuding the prepayment charges) and take a new loan for buying the new car.
Gagan asked, Hi Harsh i bought a car in may 2007 and took a loan from ICICI bank i have paid 6 installemnt now i want to finished my load if i will paid all money then i will get some discount or not??
Harsh Roongta answers, On the contrary you will need to pay pre-payment charges for paying off the loan earlier than scheduled.
sanjay1 asked, Is 6% flat rate of interest on a car loan looks attarctive? pls advise
Harsh Roongta answers, If the bank isd quoting a flat rate of interest the effective interst rate is very high. avoid if you can do it and take a loan from a bank that quotes its intereest rate in effective rates (as most good banks do and as is the requirement of RBI)
Anuradha asked, Is it reliable to go for a car loan thru the dealer from where you are buying the car
Harsh Roongta answers, Why not. You can also try market places like apnaloan.com to ensure that you get competitive offers.
btilak asked, Hi Harsh, I am currently trying to decide between a new car and a pre-owned car however I am surprised at the difference in interest rates and documentation process the dealer asked for. Is it justified?
Harsh Roongta answers, already answered. please see chat transcript
hagler asked, is there a way to get competitive rate of interest on used cas loan for a bigger car above 10 lakhs (used car value)?
Harsh Roongta answers, You should use market places like apnaloan.com to get the banks to compete for your loan.
dks777 asked, hi harsh-kotak is charging me 13%on 3 years installments of a new honda civic ..is it 2 high?
Harsh Roongta answers, The best way to find out is by making the babnks compete for your loan. You can see the indictaive loan rates on this link. http://www.apnaloan.com/car-loan-india/rates.html
Shreenivas asked, Sir,I heard that ashoklayaland finance provide is giving car loans as 4% for new car and 7% for old cars,is it true. One more thing I would like to know where I will get low intrest loan for cars.
Harsh Roongta answers, Must either be flat rates or be available only if you buy a specific brand of car form a specific dealership. Otherwise it is too good to be true and must have a catch in it.
abhay asked, my son is govt employee.govt permission is ncessary for purchase a car. pl confirm govt permission is ncessary for co borrower or gurantor ? co borrower or guarantor
Harsh Roongta answers, Unable to answer this question. It is best for you to check with your Human Resources department.
parmod asked, hi sir i m parmod sir i want to purchase m 800 a/c white but sir i m living in village area so in this area are negetive area according to bank sir give me solution i m urgent purchese .
Harsh Roongta answers, If you have an existing good track record on any earlier loan or credit card it should be possible. Another alternative is to approach a public sector bank who do not have the concept of negatiove areas as long as your icnome papers are able to justify the loan amount.
Navin asked, Sir, does bank allows part payment for car loans?
Harsh Roongta answers, This answers many similiar questions. Yes most banks will allow but each bank may have its own rule in this regard. Also banks will charge a pre-payment charge for the early payment.
Harsh Roongta says, Ok Folks. It was a real pleasure chatting with all of you. Please read the chat transcript as most questions have already been answered. If you still have some doubts you can login to Apnaloan.com. Bye till next time.
Roongta is the co-author of a popular guide to home loans, Complete Home Loan Guide.
apnaloan.com offers a guide to car loans in India. It also enables consumers get best rates by making banks compete for their loan.