Similar to the plethora of cars to choose from suiting every budget and requirement, there are a variety of finance options available too. There is flexibility in terms of the finance options offered by the companies, which sometimes also add to the confusion for the customers who find it difficult to choose what suits them the best. Car loans in India are usually available in three types. The first type of car finance in India is auto financing.
Auto financing gives you the option of borrowing the full amount of the car or making a deposit against the loan. Some banks even let you borrow four to six times of your income under such a scheme. The second type of car finance in India is the pre-owned car loans. In case of a pre-owned car loan, the borrowing amount happens to be much less. These loans sometimes prescribe limits on the types of vehicles you can buy, which are two to four years old. You can even choose to borrow the full amount for the loan just as you do for a new car loan, but there are more risks with a pre-owned car.
The third type of car finance is where you have to borrow money and use the vehicle purchased as a loan security. It means that the lender can claim the car, if the borrower is unable to pay back the loan amount. Along with the abovementioned car loans in India, there are also car hire schemes that give you the opportunity to purchase a car, without actually investing money in them.
In addition to the different types of car loans in India, several pathways have been suggested to repay the loan. Regular EMI is the most common type of repayment options availed by Indians when it comes to car loans. The car financing interest rates remain fixed, and there is no fluctuation that guarantees stability to the buyer. Another type of repayment option is Step-up EMI, wherein the car financing interest rate is lower in the initial stages and goes on increasing subsequently as the time increases. Likewise, they have Step-down EMI where unlike the step-up EMI option, the EMI reduces gradually from being highest at first.
Another option is Balloon EMI, where 20 percent of the lump sum amount is paid at the beginning that reduces the initial burden on the borrower although the car financing interest rate is higher. You can also have Special tie-up which ensures maximum advantage for the lender where the lender, based on his previous connection with the bank, enters into a contract upon which whenever there is excess amount in his account the same is channeled towards the repayment of his car loan. It is always better for the consumer to know what option of car finance suits him the best. So he can measure the pros and cons of each of the options for car finance in India are available and make the best use as per rate of his interests.