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read If you intend to buy a car there are lots of options available with launch of new car brands in the Indian market. Going for the right kind of car loan is very important in the case you decide to buy a car on finance. There are lots of factors that play their roles when you decide about a certain car loan. Normally it is better to peg your car loan around 10-15 % of your net income.
Getting a car loan has become easier nowadays. There is a healthy completion in the market among banks to offer finance options to clients and earn interest on them.
In the past one year, many public sector banks, including State Bank of India, Bank of India and Bank of Baroda have started offering floating rates on auto loans. Private sector lenders too are beginning to offer floating rate loans. ICICI Bank, which was offering both floating and fixed options way back in September 2007, is planning to offer only floating rate loans from August 25.
"Earlier, we were planning to increase over fixed and floating rates by 50 basis points each. However, now we feel that the interest rate cycle has almost peaked. For the customer, it will make a lot of sense to get into floating rate auto loans." Said N R Narayan, head of vehicle loans, ICICI Bank. Expecting another rate hike in the coming six months, he said the interest rates would move southwards after that.
Taking car loan from some financial institution is the easiest and most used way of financing your car. In this case the car you buy is actually a possession of the lending institution. The formal term used is 'hypothecation clause', which means that though you own the car, the lending institution is using the car as a security against the loan taken by you. Once you have cleared all the dues, this clause is removed from the agreement. It is notable that a self-employed person can get tax relief on the interest paid for the car loan.
Another finance option for purchasing a car is hire purchase. In this system, the lender buys the car on your behalf and sells it to you on hire purchase. In fact, you hire the car from the lender and own it once you have settled the dues.
Lease is another option for financing a car. If you go for this option, the car is owned by the financier and leased out to you for a monthly installment, which includes both principal and interest payment. When the lease period ends, you become the owner of the car and the vehicle is formally transferred in your name.
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