CAR/ FOUR-WHEELER LOAN:- Q-1 Are car loan interest payments tax deductible? Ans- Cars usually come under the category of luxury items and as such no tax benefit is offered on the interest payments, to individuals who avail car or auto loan for the purchase of the vehicle. However, car loans availed by self-employed individuals for vehicles that are used for commercial purposes are eligible for tax deduction under section 80C of the Income Tax Act, 2016. For additional vehicle loan options and guidance through a great bank you can visit their website. Q-2 Do car loans have a prepayment penalty? Ans- Prepayment of Car Loan is purely a matter of choice based on your financial situation. The key benefit of prepaying a Car Loan is that it reduces the loan amount by decreasing the interest burden and frees the amount of your earnings which are being paid as EMIs towards the loan. However, most banks discourage prepayment, because it deprives them of their interest earnings and generally put forward the following conditions:
• For fixed interest Car Loans, there is a prepayment penalty levied, which is usually in the range of 3-5% for private financiers and 2% for public sector banks. Additionally, service taxes are also applicable on such payments.
• For floating interest Car Loans, there are no prepayment penalties as per the new guidelines by the RBI. So, you can easily prepay or migrate the loan to a bank that offers a lower rate of interest as compared to the existing loan.
Although, the conditions may vary from bank to bank.  Q-3 How car loan EMI is calculated? Ans- Car Loan EMI can be calculated in three ways:
• By using mathematical formula, EMI=[ P x R X (1 + R) ^ N] / [ (1 + R) ^N – 1]
Where, P is the principal loan amount, R is the rate of interest per month and N is the number of monthly installments. If the rate of interest per annum is 12%, then the interest rate per month will be 1% (12%/12).  For example, if the loan amount is ₹ 10 lakh, monthly interest is 0.75% (for an annual interest rate of 9%) and number of months is 180 (15 years tenure), using the formula, the EMI would work out to ₹ 10,142.67. However, calculation through this formula is a bit difficult and more prone to errors.
• By using Excel Spreadsheet, applying PMT function, the periodic payments required to pay off the loan with interest over a fixed tenure can be calculated.
The syntax of the function is as follows: PMT ( rate, period, pv, [fv], [type] ), where rate is the interest rate per period, period is the number of periods over which the loan has to be repaid, pv is the present value of the loan, fv is the future value of loan and type specifies if the payment is made at the beginning or end of the period.   Let’s understand the formula through an illustration. Consider a car worth ₹ 7 lakhs. For a loan to purchase the car with a down payment of ₹ 2 lakhs, the loan amount would come to ₹ 5 lakhs. If the interest rate is 12% per annum and the tenure is 5 years, the Excel PMT formula would look like,   PMT(0.12/12, 5*12, 500000), where the period considered in months. The last two arguments can be safely omitted.   This formula will give you a result of ₹ 11,112.22, in red or negative which denotes cash outflow.   You must add processing charges and other fees to get an accurate result.
• By using EMI calculators, you can calculate your EMI instantly and conveniently, by correctly entering the following details of your loan:
• Loan Amount: Enter the Loan amount you wish to borrow for your Car. Always try to make maximum down payment to reduce the loan burden
• Interest Rate: This is the Interest rate that is charged on the money borrowed. This rate is monthly reducing balance.
• Tenure: Select the period for which you wish to take the Car Loan. Generally, car loan tenures range from 1 to 7 years.
• Processing Fees: Many banks charge a processing fee at the time of disbursing a car loan. It normally ranges between 0 to 2% of the loan value.
• Proof of address (Utility bills, Bank passbook, Voter ID, Passport, Aadhaar)
• Co-borrower’s proof of Income:
• Salaried Co-borrower-
• Last 6 months pay
• 6 months bank statements.
• Self-Employed Co-borrower-
• 2 year’s income tax returns.
• Last year’s Bank statements.
Q-23 Will the bank pay the full amount of the two-wheeler? Ans- Generally, the banks offer 80- 90% of the value of the two-wheeler, depending on the make and model of vehicle you choose. Finance on premium segment motorcycles is restricted to 70% of the vehicle value. Q-24 Are two- wheeler loan interest payments are tax deductible? Ans- Like car loan, two-wheeler loan interest payments are also not eligible for tax deductions. Q-25 Can I pay the full loan repayment, before the tenure of the loan ends? Ans- Yes, you can. You might be charged a nominal pre-payment fee for the same. Q-26 How to get a two-wheeler loan with a bad credit score? Ans- There can be several ways to get a two-wheeler loan even with a CIBIL score of less than 500. You can easily get the loan if you have a co-borrower or guarantor with a sound credit score, which increases the surety of the paying back the loan. You can also talk and negotiate with the lender and state genuine reasons for the low credit score. In addition, you can also give the proof of your income and stability to convince your lender to provide you with the loan. Q-27 Do I need to visit the bank to avail a two-wheeler loan? Ans- Absolutely not. In fact, in the case of a dealership, the showroom will take care of the things related to the loan sometimes with a representative from the bank available in the showroom itself. Else, you can apply online as well. Q-28 Will the implementation of MCLR change my two-wheeler loan EMI? Ans- EMI of your loan will slightly decrease if the loan is availed at a floating rate of interest. But if the interest rate is fixed, then the implementation of MCLR will not affect your EMI. Q-29 Will I be allowed to switch from a floating rate to a fixed rate of interest or the other way round for my two wheeler loan? Ans- Yes, some banks make it possible to do so. But, they also charge a conversion rate for the same. Q-30 Can I get the loan without income proof? Ans- Finance up to 70% can be provided without income documents to small business owners and people with clean loan repayment records in the past.    COMMERCIAL VEHICLE LOAN:- Q-31 Can I get a Commercial Vehicle Loan without a bank account? Ans- No. A bank account is mandatory. In case you don’t have a bank account, you can apply for a new bank account which will be considered even if it has no recent transactions. Q-32 Do I have the option of pre-paying the entire loan amount? Ans- Yes. One can pre-pay the loan any time after 6 months of availing of the loan by paying a small prepayment fee on the outstanding loan amount. Q-33 What are the different segments and funding ranges available? Ans- Following are the segments and funding ranges available:
• Small fleet Operator: 90-100%
• Medium fleet Operator: 100%
• Large fleet Operator: 100%
However, additional funding available on body depending on the customer profile. Q-34 Do I need a guarantor? Ans- The requirement of a guarantor depends upon the credit strength and profile, as stated by your lender. Q-35 Who can be the co- applicants for the loan? Ans- You can have the following as your co-applicants depending upon your status:
• Blood relatives and spouse in case of individuals.
• Partners in case of Partnership firms.
• Directors in case of Private Ltd companies.
Q-36 What security/collateral do I have to provide? Ans- No additional collateral required other than the vehicle on which the funding is extended, but in case of partnership firms or private limited companies other collaterals such as- “office premises” can be used. Q-37 What are the loan tenure options? Ans- The tenure of the loan can range from a period of 12 months to 60 months depending on the product and your requirements. Q-38 What are the minimum & maximum loan amounts? Ans- Loan amount can vary from a few thousand to crores depending upon the specific requirement. Funding can be up to the extent of 100 % of the chassis, body funding can be extended on special requirement & profile. Q-39 How much time will it take for my loan to be sanctioned? Ans- The loans are generally sanctioned within 24 to 48 hours of submission of complete documents. However, the time may vary depending upon the nature of the loan, quantum of funding, documents provided by the customer etc. Q-40 How is the interest charged/calculated? Ans- Interest is calculated on a monthly reducing balance basis, which means the principal gets reduced at the end of every month and the interest is calculated on the outstanding principal at the end of the month.

Share Contents

Post Categories