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| Types of Car Loans
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These days getting an automobile loan is quite easy. Organized
and institutional auto finance has come of age and companies are aggressively
marketing auto loans schemes by offering innovative and tempting offers to
the customers.
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Most of the lending institutions finance up to 90% of the cost
of the car, depending on the model of the car and the repayment period. |
We are explaining some of the popular loan schemes. Select
a scheme that suits you best. |
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Margin Money Scheme |
Under this scheme, you are required to pay margin money
of at least 10% of the total loan amount, along with one EMI. The balance
amount is paid through post-dated cheques, which are issued for the balance
EMI's covering the remaining period. With a repayment term of one to
five years (in some cases seven), the Margin Money Scheme is the most
sought after. One of the major advantages of this scheme is that it has
lowest EMI to be paid, compared to other schemes for the same amount
of loan.
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Advance Equated Monthly Instalment Scheme |
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Advance Equated
Monthly Instalment Scheme |
This scheme offers
100% loan. You have to pay up to five EMIs in advance and the balance
is paid through post-dated cheques covering the remaining period of
the loan. One of the downsides of this scheme is that though it offers
100% finance, you need to pay five to nine installments up front. Besides,
you go on to pay a higher EMI amount because the interest is charged
on the entire loan amount.
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Security Deposit Scheme |
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Security Deposit
Scheme |
Under this scheme
you are required to deposit a specified sum as security deposit against
the amount provided as the loan. This security deposit is refundable
on completion of the full period of the loan. You will receive interest
on the deposit, which in most cases is lower than that charged to you
on the loan amount. The EMI under this scheme is higher than the EMIs
under the above two schemes. The security deposit ranging from 10-30%
of the total is returned after the loan period. The deposit also earns
a simple or compound interest, the tenure lasting for two to five years.
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Hire Purchase Scheme |
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Hire Purchase Scheme |
This is an agreement
under which the car is let on hire and under which the hirer has an
option to purchase the car in accordance with the terms of the agreement.
Hire Purchase agreement is mostly offered by Non Banking Finance Companies.
Broadly this option works similar to the loan option. NBFCs usually
charge an amount as low as One Rupee, called Option money, on payment
of which the car passes on to the hirer. The NBFC's have taken to this
option, as they are not encouraged to give loans, which is a Banks
privilege.
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Lease Financing Purchase |
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Lease Financing
Purchase |
Lease is a contract
between the owner of an asset (the Lessor) and its user (the Lessee)
for the hire of that asset. The ownership rests with the lessor while
the right to use the asset (car) is given to the lessee for an agreed
period of time in return for periodic rental payments by the lessee
to the lessor. Lease agreements are offered by NBFC's and are mostly
availed by Corporates looking at it mainly from tax saving angle.
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Finance Tips |
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Narrow your choice of car down to two or three options.
Try and do this around a period when dealers are trying to woo customers.
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Approach a reputed dealer close to your home stocking the car you are interested
in and find out the best price he can offer with and without you taking finance
from them.
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Check out the dealer's financier to find out if there are any special offers
on. Get the best rates off the house financier without taking the dealer
discounts to reduce financing cost. See if the in-house dealer financier
combination is offering something special over and above the cash discount.
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Contact rival financiers and get their best rates - ask them to recommend
a dealer for the car of your choice. See if that dealer is giving you a better
deal.
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If there are no specials on discounts, you can take a dealer from here and
a financier from there to structure your package. Opt for the cheapest combination
of dealer and financier.
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One can never be too sure. Call
two or more finance facilitators while choosing a finance scheme. Try and
compare similar schemes so that you get a good idea of what you are in
for. Make sure that you get the best value for your money, after all that's
what consumerism is all about. |
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