You see, in the last year, India actually hit record-high sales of cars or passenger vehicles in the country. Like, in 2023 alone, more than 4.1 million passenger vehicles were sold, and you’d agree that it is a huge number, right? One reason for that is that car loans are made much easier for people right here in India, and that’s why people are buying their dream cars without even worrying about their current financial situation. And thinking of that, you might also want to apply for a car loan, but you held that urge for a second and wanted to evaluate the situation, right? Well, for wise people like you, we have come up with a post where we will be sharing the possible advantages and disadvantages of car loans in India. And here we go now.
Advantages of Car Loans
1. Get Your Dream Car Fast
Want to just zoom around in your dream car without waiting forever to save up? Car loans in India are your fast pass. You see, it is a 100% true that saving up enough cash to buy a car could take ages, but with a car loan, you’ll be hitting the road in no time. This is a game-changer, especially if you or your family need a ride ASAP for daily stuff or just to make life better. Basically, car loans turn that “someday” dream into “drive it today,” making sure you’re not stuck waiting for wheels.
- Also Read: Car Loan vs Personal Loan: Which is better?
2. Makes Money Stuff Easier
Thinking about a car loan? It actually makes handling your cash easier. Knowing exactly how much you gotta pay each month for the car loan helps you budget like a boss. This way, you can keep your finances tight and right, balancing your dream car with your savings goals you know? It’s like hitting two birds with one stone, yeah, cruising in your car while keeping your wallet happy.
3. Boosts the Economy
Believe it or not, your car loan is doing more than just getting you places, it’s revving up the economy too. More people taking car loans means more cars sold, which cranks up production and creates jobs in the car biz. This domino effect keeps the economy going strong, you know, proving that your car loan is part of a bigger picture that helps everyone.
4. More Cars to Choose From
With a car loan, you’re not just stuck looking at the budget-friendly options. You get to pick from a wider range of cars like safer, comfier, or even greener rides. This financial wiggle room means you don’t have to settle for less, you can get the car that ticks all your boxes, fitting your life and your budget perfectly.
5. umps Up Your Credit Score
Handling your car loan well is like giving your credit score a good boost. Paying on time shows you’re good with money, which can boost your credit score. This is awesome for later, like when you want to get a house or snag better deals on loans. Keeping up with your car loan payments can set you up for sweeter financial deals down the road.
Disadvantages of Car Loans
1. Those Sky-High Interest Rates
Ever dreamt of zooming around in your own car? Hold up a sec. The real issue with car loans is the interest rates. Picture this: you grab a loan for Rs. 500,000 at a 10% interest rate for 5 years. Before you know it, the interest alone is like half of what you borrowed in the first place. Suddenly, that car’s price tag isn’t just what’s on the sticker, it’s actually way, way more.
2. The Credit Score Hurdle
Not everyone can just go in and snag a car loan. Nah! It’s all about your credit score. If your credit history’s a bit rough, banks might not even give you the time of day. Or worse, they’ll charge you way too much in interest. It’s like, make sure you’ve got your credit score in check before even thinking about loans.
3. Risk of Saying Bye to Your Car
Miss a few payments and bam, the bank could swoop in and take your ride. Not only do you lose your wheels, but your credit score takes a hit, too. This makes it tougher to get financial help down the line you know? So yeah, think twice about whether you can keep up with those payments.
4. What You’re Missing Out On
Here’s the thing, every penny you throw at your car loan is money you could’ve invested elsewhere. Let’s not forget, that cars lose value the minute you drive it off the lot. Meanwhile, putting that cash in stocks or savings? That could’ve beefed up your wallet. So weigh it out on your own: cool car now, or more cash later?
5. Owing More Than It’s Worth
Cars lose value fast, but your loan amount stays the same. This could leave you owing more than the car’s even worth. If you’re thinking about selling or trading in later, that’s a problem. Give a good, hard look at how fast your car will lose value versus how quickly you’re paying off the loan.
6. The Long Term Commitment
Car loans don’t just disappear overnight. You’re in it for the long haul, making payments year after year. This commitment can tighten the purse strings and make it hard to deal with surprise expenses. Shorter loans mean less interest but higher monthly hits to your bank account.
7. Those Annoying and Limiting Loan Terms
Car loans come with all sorts of fine print. Prepayment penalties, steep foreclosure charges, and yeah, the list goes on. These can make dealing with your loan a real headache. Do your homework and know what you’re signing up for to avoid any nasty surprises.
Car Loan FAQs
Q1. How does one’s credit score affect the car loan application?
Ans: Well, the equation is pretty simple here, the better or higher your credit score, the lower your interest rates will be, or the easier it will be to get your car loan approved.
Q2. Can I prepay my car loan without any extra charges?
Ans: See, this thing right here can depend upon the lender, well, most of the time. But yeah, some banks like Bank Of Baroda actually offer car loans with absolutely zero foreclosure charges.
Q3. What are the required documents for applying for a car loan in India?
Ans: Well, we’d say that you should keep documents like Aadhar, PAN card, some sort of address proof, financial statement, or salary slip, by your side if you want to make the car loan application process much easier for you.
Q4. How long does it take to get approval for a car loan?
Ans: Car loans are famous for their faster approval times, but that totally depends upon the lender too. Usually, you’ll get the approval within a matter of days, but only if you are the right candidate, you know?
Q5. Can I apply for a car loan with a co-applicant? If yes, what are the benefits?
Ans: Yes, it is totally possible! Talking about benefits, you’ll get better interest rates, and your chances of loan approval will be way higher.
Q6. What happens if I default on my car loan repayments?
Ans: That’s pretty simple, if you default on your repayments, your car will be taken from you and it’ll also hit your credit score. Simple as that.
Anantha Nageswaran is the chief editor and writer at TheBusinessBlaze.com. He specialises in business, finance, insurance, loan investment topics. With a strong background in business-finance and a passion for demystifying complex concepts, Anantha brings a unique perspective to his writing.
