Be clear of the cost factor when you look to realize your car dream is what a financially feasible advice would be. Dreams do need proper financial plans to get fulfilled. And if you are short on the plans, you may end up paying heavily on a loan. So, you first choose a car model of your budget, followed by accumulating the savings to make the down payment to a car dealer. But the important things are the interest rate, eligibility and EMI. The world of car loan eligibility mainly revolves around these three aspects as it dictates the ownership cost. Stay tuned with us as we prepare a solid track for your car by throwing lights on the aspects stated above.
Interest Rate:
Doesn't matter how much the dealers convince you to deal with them, you should not initiate unless the lender offers you a car loan at a lower interest rate. Dealers have specific tie-ups with the lenders to get the car loan financed to buyers. It is very much possible that the dealers would make you deal with a certain lender even if the interest rate offered there is much higher. And if you cave in to their insistence, chances are higher that your pocket will get thinner and thinner with the days passing by. The interest rate on a car loan ranges from 9.20%-15% for new vehicles and 14%-21% for old models. Let us understand the interest rate dynamics with an example below.
Example:
Case I-Abhishek Verma, a Software Engineer by profession, applied for a car loan of ₹ 6 lakhs for a period of 7 years. The interest rate offered to him is 9.80% p.a.
Case II-Sahil Solanki, a Business Development Officer, applied for a car loan of ₹ 6 lakhs for a period of 7 years. The interest rate is his case is 12% p.a.
The interest rate difference between the two is just 2.20% in simple mathematics. But that difference will compound over the years to cause worry for Sahil. Let' see how.
The EMI, interest and total outflow from Abhishek's pocket over the tenure are expected to be ₹ 9,899, ₹ 2,31,501 and ₹ 8,31,501, respectively. While in the case of Sahil, these will be 10,592, 2,89,698 and 8,89,698 (The amounts are in the order of preference as followed in Abhishek's loan)
You can see easily gauge the difference in payouts between Abhishek and Sahil with the former saving around 700 on EMI and over 50,000 on the overall interest outgo over the latter.
Eligibility:
- Both salaried and self-employed can apply for a car loan at various lenders.
- Salaried and self-employed must have a minimum age of 21 years and 18 years, respectively, at the time of loan application. And when the proposed loan is about to complete its tenure, the age of a salaried should not be over 60 years while for self-employed it is 65 years.
- Both salaried and self-employed must have an earning of ₹ 1,80,000 to meet the eligibility.
- While salaried is required to have an overall work experience of 2 years with a year of service at an existing organization, self-employed must have stayed for atleast 3 years in the same line of business.
How Much Loan Expected to Come Your Way?
The amount of loan, expected to come your way, is ascertained by the car loan eligibility calculator. It takes into account your earning and the savings before computing the amount of loan. Before all that, the per lakh EMI is calculated.
If you apply for a 7-year new car loan at SBI, which offers the same at an interest rate of 9.20%-9.25% per annum, the per lakh EMI will then be ₹ 1,619-1,622. This amount will be taken into consideration by the bank to calculate the eventual loan amount. Let us assume you earn ₹ 20,000 per month and save 9,500. In that case, SBI can offer you a car loan calculated from the formula stated below.
Car Loan Eligibility- ₹ 1,00,000 x savings/per lakh EMI
- ₹ 1,00,000 x 9,500/1,619= ₹ 5.87 lakhs
- ₹ 1,00,000 x 9,500/1,622= ₹ 5.85 lakhs
So, a loan of ₹ 5.85 lakhs-5.87 lakhs is waiting for you at SBI.
Car Loan EMI Calculator:
EMI, the short form of Equated monthly installments, is a monthly loan repayment amount. EMIs are calculated based on loan amount, tenure and interest. A loan of ₹ 6,00,000 at 10% interest rate for 7 years comes with an EMI of ₹ 9,961, interest outflow of ₹ 2,36,700 and ₹ 8,36,700. You can also calculate EMI via a formula below
E= [P x R x (1+R)^N]/[(1+R)^N-1]
Where E=EMI
P= Principal Loan Amount
R=Interest Rate
N=Number of Monthly Installments
Finding endorsement for almost any size of Business loans online having inadequate credit can possibly be challenging. This is due to traditional lenders, like banking institutions, include put into practice rigorous credit guidelines, utilizing anything of a credit squeeze by causing your wants
ReplyDelete