An emergency may strike without warning and it may leave you in an urgent need of cash. Using your property as collateral or applying for a personal loan is a long and tedious procedure.
Financial institutions now allow you to use your vehicle as collateral to avail of a loan. Lenders provide new vehicle loans, used car loans, and also offer loan against your existing vehicle.
Loan against vehicle is an arrangement wherein you mortgage your old car to avail of the borrowed amount. The tenure, interest rate, and amount vary from one institution to another based on the facility availed.
Lenders finance most types of cars that are not more than ten years old. The loan against vehicle eligibility also depends on the vehicle’s present condition. Lenders hire professional experts to determine the value of the vehicle before sanctioning the loan application. Financial institutions may not finance the vehicle if it is out of production. It is recommended that you check the eligibility criteria on the lenders’ websites prior to applying for the loan,
Benefits of loan against vehicles
- Higher loan amount based on the current value of the vehicle
- Quick approval within three working days and fast disbursal, thereby ensuring that you meet your immediate fund requirements
- Flexibility in repayment options to ensure that you have no financial distress while paying the Equated Monthly Installments (EMIs)
- Even if you have a lower credit score, you may be able to avail of a loan against your car
- Compared to credit card and personal loan rates, the loan against vehicle interest rates are lower, thereby making it an affordable means to avail of finance
Loan against vehicle documentation
When you apply for a personal loan or a loan against property, you may need to submit several documents making the procedure tedious, cumbersome, and long. In comparison, financial institutions require minimum loan against vehicle documents, which makes the procedure quick and simple. You need to submit only your income proof and Know-Your-Customer (KYC) documents at the time of application. In addition, vehicle-related documents such as Registration Certificate (RC) book, Pollution Under Control (PUC) certificate, and a valid car insurance policy will be needed to apply for this type of loan.
It is possible that you may have availed of a new car loan at the time of purchase. Lenders may provide a top-up loan based on the amount that has been repaid on the original loan amount. The additional loan amount is repayable in EMIs based on the tenure and interest rate levied by the financial institution.
Tips to choose the best loan against the car
Unlike a personal loan, a loan against the car is secured by the vehicle. The borrowed amount has no limitation of use and you may use the money for any legal purpose. A large number of banks and Non-Banking Financial Companies (NBFCs) offer such types of loans. It is recommended that you check online on a third-party portal to compare different loans offered by various institutions.
You will be able to see the terms and conditions, interest rates, loan amount, and tenure offered by different institutions to help you make an informed decision. You must also check the processing fees, prepayment penalty, and other charges that may be applicable on the loan.
Use your vehicle to raise funds and meet your emergency cash requirements.