What To Look For In A Car Loan Agreement

author image Monday 27 July 2015, 15:36 PM Car-Finance

Owning a car is an aspirational decision for many residing in India. The wish of driving around various places, travelling to cities and also a more convenient way to take everyone in the family encourages a person to get his own car. To help fulfil this dream, there are numerous financial institutions willing to lend car loan in India. A customer can conveniently avail car finance to buy his dream car with the only condition being he has a proper idea of the different clauses mentioned in the loan agreement.

What to look for in a car loan agreement
What to look for in a car loan agreement

Here are the necessary things to watch out:-

Effective Date: - This is the date when the first disbursement of the loan is made and all interest computation begins. The loan will be cancelled in case a borrower fails to utilize the money within 60 days of effective date. The registration of car needs to be done within 15 days of delivery from the showroom.

Amortization Schedule: - This states the schedule of repayment that the borrower has to adhere. The payback contains both the principal amount and the interest amount. Usually, the financiers are authorized to alter this schedule at their sole discretion. The borrower has the right to contest during signing the loan agreement.

Prepayment: - Most of the financing companies have a declared prepayment policy.  The loan agreement usually states that the acceleration in repayment and the amount of the repayment charges will be at the sole discretion of the financier. A written policy on this issue can be obtained from the financier prior to signing a car loan agreement.

Default: - Very few borrowers have a complete grasp on this specific clause. In most of the agreement, the financier states that it will not provide any notice for timely repayment of loan dues.

Inspection & Assignment: - The financier can carry out inspection on the car and its related documents. This process can be conducted by a financier without any sort of intimation.

Cross Default: - The cross default clause in a car loan agreement declares puts a borrower in default. This is done when the borrower defaults on the repayment of any other unrelated loan from that or any other financier.

Make sure you are clear of the clauses associated with a car loan in India.  Keep the important things in mind to take a right call. The quick car lending procedure has increased the demand of cars in India

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