Financial institutions in India offer 3 different types of lending facilities for vehicles – new car loan, used car loan and loan against vehicle. As the name suggests, a new car finance facility is for new cars purchased whereas the used car financing is available for pre-owned vehicles. Contrary to them, there is another financing option available wherein you can pledge your car to secure funds that can be used for any financial need of yours. It is known as a loan against car. This facility is more like a personal loan but against the security of your car. The amount of loan, tenure and the rate of interest charged differ among the financial institutions from whom you avail the loan.
It is important to check your loan against car eligibility with a financer of your choice. Other loans require a decent credit score and stable income while applying for one. But not in the case of loan against car. The car which is to be pledged should be older than five years. Also, it should be retailed in showrooms as on the day of applying for the loan. The vehicles which are discontinued by the manufacturers are not considered for pledge. The applicant should be aged between 21 and 65 years of age (both inclusive). You need to furnish a proof of income that proves your repayment ability according to the lender.
Your loan against car can be availed in two ways, refinance or top-up. Refinancing means availing a loan against car which is already hypothecated with the financial institution. On the other hand, top-up loans can be availed by existing borrowers.
The loan against vehicle interest rates begins around thirteen percent. Being an instant source of finance, it is affordable than other options in the market. Loan against vehicle resembles a personal loan as there is no restriction on its usage.
Let us look at the list of documents that are required while getting a loan against car –
- Proof of Identity – Voter ID, PAN card, passport.
- Age Proof – Voter ID, PAN card, passport.
- Income Proof – Salary slip, account statement, and Return of Income.
- Address proof: Telephone bill, passport, and photo ration card
- Documents pertaining to the vehicle – Driving license, vehicle registration document, and vehicle insurance.
Now we know about the documents required, here are the benefits of availing loan against car. The finance obtained can be used in other areas of personal and professional life. For example, you can invest the money in your business for expansion or finance an emergency medical aid. Similarly, you can use that amount to bridge other temporary financial needs.
Make sure you adequately research to finalise the lender and avail the best interest rate for a loan against your car.
