What is a car loan?

A Car Loan is taken from a financial institution or bank, specifically to buy a car. In this scenario, the dealer of the car is paid upfront by the lender, and the borrower pays the lender the full loan amount over a specified term as equated monthly installments along with the applicable interest and fees. The car for which the loan was taken, works as a collateral and serves as security for the loan. Car loans are usually available for a period of 1 to 7 years.

What are the features of a car loan?

The following features are true to car loans and any other types of auto loans.

Low down payment:

Car loans can be availed of by paying a minimum down payment. This is a convenient feature of car loans as you can buy a car with a very small amount and keep repaying the balance with the accrued interest as per a predetermined schedule.

Flexible repayment terms:

Car loans can be repaid by choosing from a number of repayment tenures starting from a few months to even 7 years.

Secured loans:

Car loans are secured loans with the default collateral being the car itself.

Easy eligibility criteria:

The eligibility criteria of the borrower is a salary certificate and a bank statement, and a minimum requirement average credit score.

Convenient processing:

The application process for car loans is very convenient and comes with minimum processing and documentation. You can even apply for a car loan online.