New Delhi: Buying a automobile will not be solely about deciding the model and model of the automobile but in addition in regards to the utilization that you’re going to put it into. Secondly, should you planning to take a loan to purchase a automobile then you have to determine whether or not you wish to purchase a brand new automobile or a used automobile. Value mentioning right here is that there’s a large distinction between a brand new automobile loan and a used automobile loan. In each the cased you have to discover out should you qualify for a automobile loan.
Sometimes banks provide three sorts of automobile loans – new automobile loans, used automobile loans, and loans towards vehicles. A brand new automobile loan is simpler to get and is accessible at a decrease rate of interest. Nonetheless, a used automobile loan, which is obtainable to purchase pre-owned vehicles, carry increased fee of curiosity. That you must perceive the deserves and demerits of each the loans earlier than making a purchase order determination on credit score.
Benefits and drawbacks of a brand new automobile loan
Benefits: Loans for brand new vehicles is simpler to get as banks choose to disburse loan for brand new vehicles. For banks, danger is decrease in case of a brand new automobile because it comes with producer’s guarantee. So banks provide as much as 90% of the on-road price of the automobile as loan for a brand new automobile. As a consequence of increased loan quantity it’s important to pay much less in direction of down fee. On the similar time, curiosity can also be low on a brand new automobile loan.
These loans are normally provided for tenor between 5 and seven years, so you’ll be able to determine the tenor as per your EMI fee capability. Rate of interest on new automobile loans begins from as little as 7.90%.
Disadvantages: Shopping for a brand new automobile comes with an added price of insurance coverage. Premium for brand new automobile insurance coverage is far increased than previous vehicles. So even when the rate of interest on new automobile loan is low, if you add insurance coverage price, whole price will go up.
Benefits and drawbacks of a used automobile loan
Benefits: As the price of a used automobile is lower than a brand new automobile, general loan quantity might be much less and the price of insurance coverage may also be much less. So your general funding to purchase a used automobile might be much less and the renewal premium of automobile insurance coverage might be much less. Banks provide as much as five-year tenor for used vehicles relying on the age of the automobile.
Disadvantages: Within the case of a used automobile, banks provide as much as 80% of the value of the automobile as loan. Additionally, rate of interest on a used automobile loan is 200-700 foundation factors increased than new automobile loans. At current, banks cost between 10-17% rate of interest on used automobile loans.