Vehicle Loans in India: Get on Roads Securely (2025) -

Vehicle Loans in India: Get on Roads Securely (2025)

January 18, 2025January 20, 2025

Brief overview of the types of vehicle loans in India

Owning your own vehicle in India has always been looked upon as a symbol of pride and exclusivity as not everyone could historically purchase their own vehicle. An owner of a vehicle seems to have a unique esteem and enjoys an elite status in society. Before the 1990s, owning a car was a herculean task in India. Loans were fewer, and automobile brands limited.

Despite customers now having more liberty to buy the car and with new economic reforms introduced in 1990s, there was only a slight increase in people buying cars. From the first NFHS conducted in 1992-93, it stated that hardly 1% of the families are owning cars. This survey was an eye opener as 8% families owned only motorcycles and scooters and rest 42% owned bicycles. The numbers improved in 1998-99. (Source: ThePrint)

Since 1951 to 2020, Indian market has seen a vast expansion going from only 3,00,000 total vehicles operating in India in 1951, to about 32,60,000 vehicles operating as of 2020. A country with extensive and the third largest road network, the preferred choice of around 60% population was the road travel. Not just public commute, the industrial goods also travelled through roads and has been rising continuously to nearly 2.7 billion metric tons of freight transported through roads in financial year 2019.

However, even with all this significant progress, Indian populations seems heavily biased towards the two wheeler segment in the personal vehicle ownership as more than 13.5 million two wheeler vehicles having been sold in 2022 alone, compared to just one in twelve households or roughly 7.5% households owning a 4 wheeler personal vehicle. This has led to significant risk on for the vehicle owners with more than 57.4 million road accidents to have been attributed to 2 wheelers. (Source: Statista)

When surveyed for low ownership of 4 wheeler vehicles, the primary reason for this was cited to be lower per capita income where, as per world bank, the average annual income of an Indian is less than ₹1,50,000 vs the minimum cost of purchasing a car (a hatchback such as Maruti Alto) is not less than ₹1,00,000. In addition to this, the perceived costs associated with car maintenance and fuel charges are higher than those associated with two wheelers.

While there is significant development in the ownership of commercial vehicles, increasing regulations, growing inflation and higher interest rates have made it costlier, thereby weighing on purchasing decisions.

However significant reforms around vehicular financing. Along with this, vehicle loans have made it possible more than ever before to own a vehicle without paying the entire cost upfront. In this blog, we’ll explore the different types of vehicle loans available in India, so you can find the best option for your needs.

Understanding Vehicle Loans in India

1) What are vehicle loans and how do they work?

A vehicle loan is a financial product that banks and other financial institutions offer to help you buy a car, whether it’s a new one or a used one. The lender pays most of the car’s price, and you pay it back in monthly instalments over a set period. The car itself is the collateral, which means the lender can take it back if you don’t repay the loan.

2) Types of vehicles covered by Loans in India

Vehicle loans in India can help you buy:

New Vehicle: Loans for brand-new vehicles from dealerships.
Used Vehicle: Loans for pre-owned vehicles, although these usually have stricter eligibility criteria.

3) Importance of vehicle loans in facilitating ownership in India

Vehicle loans are crucial because they make owning a vehicle whether private or commercial way more affordable by breaking down the cost into manageable EMI payments. Rather than leasing, a vehicle loan makes it way more manageable and affordable without making a large dent in your wallet, allowing you time to grow your income first and manage your repayment schedule accordingly.

4) Key factors influencing loan eligibility in India

Several factors influence your eligibility for a loan and the interest rate you will get:

Credit Score: A higher score usually means better repayment capabilities resulting to better loan terms by lenders.
Income Level: Lenders want to see stable income reflecting in your bank account.
Tenure: The loan amount and income levels determine the tenure. The valuation of the vehicle, which serves as the collateral security, determines the loan amount.
Vehicle Type and Age: New cars generally have lower interest rates than used ones as valuation of the vehicle is higher in case of new.

Benefits of Vehicle Loans

Accessibility: Making vehicle ownership more achievable for a wider population.
Affordability: Spread the cost of the vehicle over manageable monthly payments.
Flexibility: Various repayment options tailored to suit individual financial situations.

Opportunity for asset acquisition without significant upfront investment

Factors to consider when choosing a vehicle loan

Interest Rates: Understand the difference between fixed and variable interest rates. Fixed rates stay the same throughout the loan period, giving you stable EMIs, while variable rates can change based on market conditions, which might lead to varying EMIs.
Loan Tenure: The loan tenure affects your monthly payments and final interest you are paying. A stretched tenure means lower EMIs but more interest overall, while a shorter tenure means higher EMIs but less total interest
Processing fee & Charges: Be aware of the processing fees and other charges, such as administrative fees, stamp charges, documentation charges, and penalties for late payments, as these can add to the overall cost of the loan.
Pre-payment options: paying extra money more than the installments before the end of the loan tenure is called a part payment. This will help in reducing your either your installment or tenor. When you pay the full loan amount in one go that is called full prepayment. To make these sought of payments, you must make informed decisions and research on the interest rates carefully.

How to compare and apply for Vehicle Loans

Research: There are various tools both online and offline that can help ease the process of researching ad comparing various options available both online and offline. Various online aggregators such as bankbazaar, Carwaale, Cars24, etc that help you compare the loans across companies. Make sure to choose the best option suitable for your needs.
Evaluate: Ensure to carefully look at interest rates, processing fees, prepayment penalties, and other charges to ensure there are no hidden costs.
Check Eligibility: When you make a Car Loan finance comparison, the priority would be the interest rate. Each bank offers different offers and interest rates on car loans. Compare and pick the lowest rate available suiting your needs.
Documentation: Gather the necessary documents beforehand to streamline the loan application process. Commonly required documents include identity proof, address proof, income proof, and vehicle details.
Application Process: Applying for a vehicle loan online is straightforward. Fill out an application form, submit the required documents, and await approval from the lender. Some lenders offer instant approval and disbursal, making the process quick and convenient.

Tips for Securing the Best Vehicle Loan Deal

Good Credit Score: A good credit score can get you better loan offers with lower interest rates. Improve your score by making timely repayments on existing loans and credit cards.
Negotiation: Negotiate with lenders for better interest rates and terms. Borrowers with strong credit profiles and stable incomes are in a better position to negotiate.
Initial down-payment: Making a larger down payment can reduce the loan amount and the monthly EMI burden. It also shows the lender that you’re financially responsible, which can lead to better loan terms.
Reading the fine-print: Thoroughly understand the loan agreement to avoid any surprises later. Carefully read the fine print to understand all terms, conditions, and charges associated with the loan.
If you need a vehicle loan, get the best deal from Kogta Financial. We offer different loan options along with flexible terms and competitive interest rates. Once your loan is approved, you can go ahead and buy the vehicle.

Conclusion

In conclusion, vehicle loans make it easier for more people to own a vehicle without needing a large amount of money upfront. Explore various vehicle loan options and compare offers from different lenders to find the best deal. With the right information and careful planning, securing a vehicle loan can be a smooth and beneficial process. Stay informed about financial matters related to vehicle ownership. Regularly check for updates on loan offers, interest rates, and financial tips to make the most of your vehicle loan and manage your finances effectively.