If you’re in urgent need of cash and own a car, you can consider taking a loan against your car. A loan against car, as the name suggests, is a type of secured loan where you can borrow money by using your car as collateral. In this comprehensive guide, we will discuss everything you need to know about loan against car.
Loan against Car: What is it?
Loan against car is a type of secured loan where you can borrow money by keeping the vehicle’s papers as collateral. You can pledge your car as security for the loan amount, and the loan amount is decided based on the car’s current market value.
The lender assesses the car’s value and offers a loan amount based on it. This loan is suitable for individuals who own a car and require urgent funds without selling the vehicle. You can use the loan amount for any personal or commercial purpose.
Types of Loan against Car
There are mainly two types of loan against car –
1. Standard Loan against Car – This type of loan is offered to individuals who have a good credit score and a stable source of income. The loan amount and interest rate offered for this type of loan depend on the borrower’s credit score, income, and other factors.
2. Bad Credit Loan against Car – This type of loan is suitable for individuals who have a poor credit score and a history of default. The interest rate for this type of loan is usually high, and the loan amount is lower than the standard loan against car.
Eligibility for Loan against Car
To be used car loan eligibility, you need to fulfill the following criteria –
1. The car should be in your name, and you should be the registered owner.
2. The car should be free from any outstanding loans. If you have any existing loan on the car, you need to clear it before applying for a loan against car.
3. The car should be insured.
4. The car should not be more than ten years old.
5. You should have a stable source of income.
Documentation required for Loan against Car
To apply for a loan against car, you need to submit the following documents –
1. Signed loan application form.
2. ID proof – Aadhaar Card, PAN Card, Passport, Driving License.
3. Address proof – Aadhaar Card, Voter ID, Passport, Utility bills.
4. Car’s RC (Registration Certificate).
5. Car’s insurance papers.
6. Income Proof – Salary Slips, Bank Statements, ITR Returns.
7. Passport size photographs.
How does Loan against Car work?
Once you submit the loan application and necessary documents, the lender will assess the car’s value and offer a loan amount. If you agree with the terms and conditions of the loan, you need to sign the loan agreement and hand over the car’s RC papers to the lender.
The lender will keep the RC papers as collateral for the loan amount. After paying off the loan, the lender will return the papers to you.
Conclusion:
A loan against car is a suitable option for individuals who require urgent cash without selling the vehicle. However, it is essential to assess your financial situation before opting for the loan as defaulting on loan payments can lead to losing your car. The interest rates for a loan against car are usually lower than personal loans, and you can repay the loan in easy EMIs over the tenure of the loan. Always conduct thorough research and compare loan offers from multiple lenders before settling for one. We hope this comprehensive guide has helped you understand everything about loan against car.