Auto Loan

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Auto Loans are different when compared to conventional Loans as the loan is provided on the basis of the vehicle purchased. Incase of non payment, the vehicle will be possessed by the Bank or the Finance Provider and sold to recover the loan outstanding.

To give an overview as to how Auto Loan works, a customer who intends to buy a new or a used card visits any of the car dealers and selects a vehicle. He then requests the Bank or the Finance provider to provide him a loan to buy the vehicle and he will pay the loan amount along with interest as per agreed terms as an EMI which can last as long as 60 months.

Some people think or rather assume when a Bank says that the first installment will begin after 45 days that their would be no interest charged for that 45 days. Instead, the interest for the initial 45 days which was not charged by the Bank will be added to the customer last installment their by increasing the amount of the last installment. Customers are confused and frustrated sometimes that the Bank representative did not tell them about this and they assumed that their would be no interest charged before the start of the first EMI.

Repayments of Auto Loan can be made via post dated cheques provided to the Bank or an account can be opened with the Bank and instructions to debit that account every month can be provided to the Bank by the customer to avoid the hassle of making sure that the amount of cheque is available in the account from where the cheque is issued.

Rate of interest charged on an Auto Loan differs from Bank and Bank and it is advisable for customers to visit a couple of Banks before finalizing on the Bank from which they want their vehicle to be financed. Also if a cheque is returned due to insufficient funds charges are levied by the cheque issuing Bank as well as the Bank providing auto loan. Details of charges are mentioned by Banks on their website and also available at their branches when the loan documentation is being completed.

Word of caution: Do not sign a blank loan application and always request the agent to fill in the financial details before you sign the documents to avoid any issues in future.