| Loan Amount
The amount of loan that can be raised depends on the value of the car. Used cars are valued by experts appointed by the banks themselves, for which some banks charge around Rs. 275. For new cars, which have been financed by taking a car loan, the amount equal to the overdraft limit minus the remaining amount of car loan is released in the borrower's account. Usually, banks lend anywhere between Rs. 50,000 to Rs. 7 lakh as loans against cars.
Type of vehicles against which loans can be raised
All cars, not more than 5 years old, can be used to apply for these loans. Even those cars which have been bought by taking a car loan can be pledged with banks for the purpose. All lenders providing car overdraft have their own list of cars which are accepted by them for the purpose of lending. But, banks generally do not provide loans against imported cars or car models which have been phased out.
Documents required for availing loans against cars
The following documents have to be submitted by the applicants along with the loan applications to the lenders:
1. Address Proof: like electricity bill, telephone bill, passport, voter ID etc.
2. Identity Proof: PAN card, voter ID, passport etc.
3. Business Proof: VAT/CST Registration No., Warehouse Receipts, Establishment Act Certificate etc. In case the applicant is self employed and is engaged in business, he/she has to provide his companies business profile on the firm's letterhead.
4. In case an applicant is repaying an existing loan, then the sanction letter and the repayment schedule of that loan.
Apart from this, some documents may be asked for by the lender after the loan has been sanctioned.
Who should opt for loans against cars?
These loans are a good option for people who need fast access to cash to meet some unforeseen situations, like medical emergencies etc, and may find it difficult to avail other loans if they have already availed multiple loans. It is also a good option for people with bad credit history who are having difficulty in getting loans, as lenders will get a security in the form of the car itself. The interest rates of car overdraft are lower than personal loan rates and credit card advances.
Some banks providing loans against cars
- HDFC Bank
- ICICI Bank
- Kotak Mahindra Bank
- Reliance Consumer Finance
- Tata Capital