What is a Car Loan? & What Are The Benefits of Car Loans?
Cars are no longer just a symbol of opulence. For many, it has become a necessity. There was, however, a time when buying a car was difficult as it was indeed an expensive purchase. This is no longer the case as there are many entry-level cars that you can buy. Vehicle finance in the form of a car loan has made buying a vehicle even easier.
A car loan is also known as a vehicle loan. Funds borrowed for vehicle financing are defined as car loans. This can either be a secured or an unsecured loan. At Finnable, we offer this loan as a type of personal loan, which can be availed without pledging any security against the loan.
So, what are the benefits of car loans, and how does it help the buyer?
Car Loan Benefits
A car loan can be availed for a new car as well as a used car. There are quite a few benefits of a car loan:
- No need to use your savings: In the past, car owners would dip into their savings for vehicle finance. One of the benefits of car loans is that you no longer need to do that. Individuals can leave their savings untouched and still buy a car by availing a loan.
- Flexibility to choose the tenure: Secured vehicle loans come with a fixed tenure where the borrower would rarely get a say in the longevity of the loan. Unlike secured vehicle loans, a personal loan availed to finance a car gives the borrower the flexibility to choose the tenure. The tenure of Finnable’s car loans starts at 6 months and borrowers can choose a longer tenure of up to 5 years.
Improved budget: The cost of a vehicle depends on two factors, its type or if it is new or used. So depending on your need and choice of the vehicle that you select, you can proceed to avail of a car loan accordingly.
Low down payment required: An unspoken benefit of a car loan, which is a type of personal loan, is that the borrower does not need to pay any down payment on the car. This is because personal loans do not require collateral or security for it. This is how car loans can finance 100% of the cost of the car.
Instant loan disbursal: A loan is only helpful when disbursed at the right time. You can apply for a car loan online and the funds are disbursed instantly. Borrowers do not need to wait for days for the funds to get credited into their accounts. Finnable disburses vehicle loan funds within 6 hours of approval of documentation.
Availability of different repayment options: Car loans provide flexible repayment options. You can select the EMI you are most comfortable with by using a vehicle loan EMI calculator and choosing the tenure of your choice.
Factors that Affect Monthly Payment?
Borrowers repay the car loan in monthly installments known as EMI. However, at the time of availing an online vehicle loan, they should use a car loan EMI calculator to know the amount to be paid as EMI. Before doing so, it is important to know the factors that can affect this amount:
- Car loan amount: The principal amount of a car loan is one of the important factors that determine the EMI amount. The higher the amount you avail, the higher the EMI amount will be.
- Interest rate: The car loan interest rate is defined by the lender. It is a certain percentage of the principal amount. The higher the interest rate, the higher the interest amount. However, with a good credit score, borrowers can avail the best car loan at a lower interest rate.
- Loan term: A car loan can be a short-term or long-term loan. Based on the tenure of the loan, the monthly payment can be calculated. Depending on your financial situation, you can choose the term. The tenure of the loan affects the monthly EMI amount.
- Income level: One of Finnable’s eligibility criteria states that the borrower must have a minimum of Rs. 20,000 as monthly income. High income could mean that you can avail a bigger car loan.
How to Calculate a Loan Payment?
Car loans are repaid through equated monthly installments or EMIs. To know your EMI, you can use the car loan EMI calculator. However, it is important to know the elements of the EMI.
To calculate the loan EMI, you will need to know the following:
Principal amount (P): This is the total amount you avail for car financing.
Interest Rate (I): As decided by the lender, the car loan interest rate is a certain percentage of the principal amount.
Tenure (n): The loan term through which the vehicle loan is repaid. This can be calculated in months or years.
Based on this, the formula for car loan EMI calculation is:
Px(R/100) x (1+ (R/100)^N / [(1+R/100)^N-1
Based on the formula, you can calculate the interest amount, the EMI amount as well as the new balance after every payment made to the lender.
Borrowers can avail a car loan from Finnable online. We provide vehicle loans that are quickly disbursed. What is more, our vehicle loans are a type of personal loan and, hence, do not require any collateral.
One of the benefits of a car loan from Finnable is that you can apply via their online app in 3 simple steps.
Moreover, Finnable asks for minimal documentation to disburse a vehicle loan. All that is needed from the borrowers are their PAN card, Aadhar card, salary slip, and bank statement.
With attractive interest rates, Finnable disburses the funds within 6 hours of verification of the documents.
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