Car Loan: Meaning, Benefits, and Factors
A car was once considered a luxurious commodity, but as the world is growing economically, a car is now considered a necessity. It is required for travel from one city to another. Not everyone can purchase a car by paying in full. Economic development made the car a necessity and increased the facilities for purchasing one. One of those facilities is a car loan.
A car loan refers to the money one borrows to purchase a car. In other words, it is the money lent to a person or organization to purchase a car. The rules and regulations of car loans are the same as those of other loans. The borrower agrees to pay back the amount to the lender along with interest in the form of EMI, and the collateral here is the car itself.
Why choose a car loan facility?
When one takes out a car loan, its benefits follow. Some of the common benefits of a car loan are listed below.
- Flexibility in choosing a period: The maximum tenure that a bank offers for a car loan is 7 years. One can choose the period of repayment according to his convenience.
- Lower interest rate: The car loan is secured, with the car as collateral security. Therefore, the car loan’s interest rate is lower than the other loans.
- Car as collateral: When one opts for the loan, collateral is required. In this facility, there is no need to provide the lender with extra collateral as the vehicle will act as a security with the bank.
- Savings are not used: With the help of a car loan facility, individuals are not required to use their savings.
- Loan processing time: The loan processing time is minimal as the car loan is proposed against the car.
- Payment facilities: Car loans can be paid in full before the end of the period. Each bank has different terms and conditions. Some allow you to pay the loan whenever you want, and some allow you to pay it after completing a specific period.
Economic growth has increased the number of people purchasing cars with the help of car loans. Many people now look forward to buying a car with a car loan. The car loan benefits many people due to its lower interest rates, no extra collateral, and payment facilities. Before applying for a loan, one must consider the above factors, which will help him select the right car and lender.