Types Of Vehicle Loans

Coins stacked in front of a car. Car loans provided by IndoStar Capital Finance

In the bustling streets and expansive highways of India, owning a vehicle is not just a luxury but often a necessity. Whether you want to buy a reliable car or a two-wheeler, in the journey to ownership, you might require financial assistance in the form of a vehicle loan. Let’s take a ride through the various types of vehicle loans available in India, making this often confusing terrain a bit more comprehensible.

1) Car Loans

Rev up your dreams with a car loan! As the name suggests, this loan specifically caters to those who want financing for their new car. It is one of the most used loans and several financial institutions offer them. These loans can cover up to 85-90% of the car’s value, some lenders may even cover 100%. What you need to know is if the lender is taking the car’s ex-showroom cost into consideration or its on-road price.

The ex-showroom cost is simply the price at which a dealer buys vehicles from its manufacturer. On the other hand, on-road price includes the cost of the car, plus the cost of accessories, warranty, registration fee, insurance, etc. Like with most loans, the interest rates, tenure, and conditions will vary from lender to lender.

2) Two-Wheeler Loans

Two-wheelers are light, nimble, and more affordable than cars. A good two-wheeler is a go-to option for many who want to cruise past the traffic with ease. Financial institutions cover a significant portion of the two-wheeler costs so you are left with a manageable down payment. Lenders like IndoStar Capital can offer you loans that cover up to 100% of the vehicle’s cost. This will drastically reduce the financial burden of owning a new bike.

3) Used Vehicle Loans

A well-maintained used vehicle can be as good as the new one but with a smaller price tag. You can get all the benefits of owning a vehicle even if it’s pre-owned and that’s where used vehicle loans come into play. It lets you purchase the vehicle without burning a hole in your pocket. The loan amount usually depends on the age and condition of the vehicle, and interest rates may vary. Lenders can cover up to 75% to 90% of the vehicle’s value or even more than this in some cases.

Do keep in mind that the interest rate for this loan can be higher than that of a new car loan. Also, some lenders may not provide you with a loan if the car is older than a certain number of years, like three or five.

4) Loan Against Vehicle

Already own a vehicle and in need of quick cash? Getting a loan against your vehicle can be a great option for you. This is perfect for those who don’t want to provide their property or anything else as collateral for a loan. A loan against a vehicle is a secured loan, so you can expect interest rates to be more attractive than unsecured loans.

You can use these funds for various purposes, be it a home renovation, business requirements, education, etc. The loan amount is determined primarily by the market value of your vehicle.

5) Refinance On Vehicle Loans

Have you taken a vehicle loan with a high interest rate? Do not worry. Refinancing your vehicle loan, in simple terms, means transferring the outstanding balance of your existing vehicle loan to another lender with a lower interest rate. It’s an effective way to lower the amount you have to pay every month. Just remember to check all of the costs involved in the refinancing process before making the switch.

6) Commercial Vehicle Loans

Buying a commercial vehicle can take away a large chunk of your capital. This could affect your business plans, day-to-day activities, and more. On the flip side, not buying a commercial vehicle that your business requires will bottleneck your growth. It’s for reasons like these, people use commercial vehicle loans. These are tailored to entrepreneurs who need financial help to be able to vehicles that help grow their business.

This includes everything from mini-trucks to transit mixers and everything in the middle. A good commercial vehicle loan aligns with the income generation potential of the vehicle, helping you steer your way to business success.

Summing Up

No matter which kind of vehicle you want to purchase, vehicle loans are here to help you. Many lending institutions offer these loans, but the loan amount, interest, terms, tenure, etc, can all be different from others. So assess your needs, find the perfect vehicle, and compare multiple lenders to find the best vehicle loan for you. The road to vehicle ownership awaits, and the right loan can be your trusted companion on this exciting journey!


What Are The Documents Needed For Loan A Car?

The requirements can be different from lender to lender, but these are some of the common ones:

  • Identity proof: Aadhaar card, passport, driving license, voter ID card, PAN card

  • Address proof: Voter ID, passport, Aadhaar card, electricity bill, ration card, driving license

  • Income Proof: Form 16, salary slips (only for salaried individuals), latest income tax returns, and bank statements going back 6 months

How Much CIBIL Is Required For Vehicle Loan?

A CIBIL score of 750 is a good score and can make you eligible for vehicle loans from multiple lenders. This is because a good credit score shows you are a reliable debtor and the chances of you defaulting on the monthly EMIs are low. Also, the higher your score, the better loan terms you get.

Can Car Be 100% Financed?

Yes, your car can be 100% financed. Not all financial institutions will cover 100% of your vehicle’s cost. Do remember that this depends on multiple factors. For example, 100% financing may be available for only certain vehicles.


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