A loan against car (LAC) is a type of secured loan that allows you to borrow money using your car as collateral. This means that you retain ownership of your car while using it to secure the loan.
LACs are a popular option for individuals who need quick access to funds without having to sell their car.
Loan Against Car Loan Details
Loan against vehicle is an attractive borrowing option for people who wish to get secured loans with low interest rates.
To know more about the interest rates or other details about loan against a used car, the table below will help you out.
| Interest Rate | Starting from 13% p.a. |
| LTV | 50%- 150% (based on several factors) |
| Loan Tenure | 12 to 84 months |
| Processing Fee | 1% - 3% |
Loan Against Car Interest Rates
Interest rates play a pivotal role in loan against car; it impacts the overall borrowing costs and decides how much EMI you would pay monthly.
Check below to see the interest rate offered for loan against car:
| Loan Against Car Interest Rate | Starting from 13% p.a. |
Loan Against Car Fees & Charges
Loan Against Car Fees & Charges encompass the extra costs that might come into play while you use your vehicle for financial assistance.
This table shows the different interest rates and charges for loans against cars.
| Interest Rate | 13% p.a. onwards |
| Processing fee | Up to 6% |
| Prepayment charges | Allowed after 12 months(based on the bank) |
| Foreclosure charges | Up to 6% p.a. |
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Calculate Your EMI
Calculating your EMI for a loan against car is a simple process. It represents the fixed amount you'll repay each month towards your loan. You can choose to calculate the EMI both offline or online. For online calculations, use an EMI calculator. With simple steps you can personalise your EMI calculations and find the best EMI that works for you
To calculate it manually, use the formula below:
EMI = P x R x [(1+R)^N] / [(1+R)^N - 1]
Where,
- EMI is the equated monthly instalment.
- P is the principal amount.
- R is the interest rate.
- N is the loan tenure.
For example,
If you’re planning to avail a loan amount of RS 50000, with an interest rate of 12%, and a tenure of 5 years, here’s how the calculation would be -
P = Rs 50000
R = 12% i.e., 12/12/100 = 0.0001 (approx)
N (in months) = 60
Now using the formula;
EMI = 50000 * 0.0001 * [(1 + 0.0001)^60 / (1 + 0.0001)^60 - 1]
Your monthly EMI will be around Rs 1,112
Loan Against Car Eligibility
Loan against car eligibility refers to the criteria and conditions that individuals need to meet in order to qualify for a loan using their vehicle as collateral.
This financial option allows car owners to leverage the value of their vehicles to secure a loan, providing them with access to funds while retaining ownership and usage of their cars.
Find the detailed eligibility requirements in the table below:
| Employment Type | Both Salaried/Non-salaried |
| Nationality | Indian |
| Age | Between 21 - 65 years(on loan closure) |
| CIBIL score | 650 and higher |
Car Requirements to Get a Loan
For a loan against car there are some requirements that should be met, it could vary based on the lender but some of the common factors are mentioned in the table below:
| Car Age | Up to 10 years old |
| Car condition | Good condition, free from major damages or accidents |
| Car insurance | Comprehensive insurance coverage mandatory |
| LTV ratio | 80% (varies by lender and car model) |
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Documents For Loan Against Car
Documents for Loan Against Car are vital for a seamless application process when using your vehicle for financial support. Below is a list of the key documents required for a loan against a car.
Identity proof (any 1):
- Aadhaar card/ Passport/PAN card/Driving licence/Voter Id
Proof of address (any 1):
- Aadhaar card/ Passport/ Valid voter ID/ Utility bill/ Driving licence
Proof of Income:
- Recent passport size colour photographs
- Last 3 month’s income proof and bank statement in pdf format.
- One cancelled Cheque and ACH form for Electronic Clearing Mandate (eNACH)
Car Ownership Documents:
- Vehicle Registration Certificate (RC)
- Insurance Policy (Comprehensive Insurance is mandatory)
- Hypothecation Certificate (if available)
- Invoice and Pollution Certificate
Repayment Options for Loan Against Car
Repayment Options for Loan Against Car offer flexibility in returning borrowed funds. The points below talk about the varied ways individuals can repay loans secured against their vehicles.
- Regular EMI (Equated Monthly Instalment): This is the most common repayment method for car loans. With a regular EMI, you will pay a fixed amount of money each month for a fixed period of time. This option is simple and predictable, and it makes it easy to budget for your car loan payments.
- Step-up EMI: With a step-up EMI, your monthly payments will start out low and gradually increase over time. This option can be helpful if you are on a tight budget at the beginning. However, it is important to note that your total interest payments will be higher with a step-up EMI than with a regular EMI.
- Step-down EMI: With a step-down EMI, your monthly payments will start out high and gradually decrease over time. This option can be helpful if you expect your income to increase in the future. However, it is important to note that your total interest payments will be higher with a step-down EMI than with a regular EMI.
- Overpayment: You can also make overpayments on your car loan whenever you have extra money. This will help you pay off your loan faster and save on interest.
- Refinancing: If you have a car loan with a high interest rate, you may be able to refinance it with a new loan at a lower interest rate. This can save you money on your monthly payments and over the life of the loan.
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Features and Benefits of Loan Against Car
A loan against car (LAC) is a type of secured loan that allows you to borrow money using your car as collateral. Getting a loan against a car offers several features and benefits, including:
Secured Loan
Get secured collateral loan
with lower interest rates
Flexible repayment
Get flexible repayment
options
Quick Approval
Get quick access to funds
with minimal documentation
Tax Benefits
Enjoy tax deductions under
Section 80C of the Income
Tax Act.
Low Interest Rates
Enjoy lower interest
rates with LACs
Retain car ownership
Continue to use your car
while servicing the loan,
without the need to sell it.
Steps to Apply For Loan Against Car
Navigating the loan against vehicle application process requires careful consideration and informed decision-making. With the right guidance and steps, you can get a personal loan against a car in a breeze.
Check the steps below oh how to apply for a Loan against a used car:
- Check eligibility: Ensure you meet the lender's eligibility criteria, including age, income, employment, credit history, and car ownership requirements.
- Compare interest rates and terms: Research and compare interest rates, loan tenure options, prepayment penalties, and other terms and conditions offered by different lenders.
- Collect required documents: Gather all the necessary documents, including proof of identity, proof of address, proof of income, car ownership documents, and passport-sized photographs.
- Choose a lender and apply online or in-person: Select your preferred lender and apply for the LAC online or by visiting their branch.
- Submit application and documents: Fill out the application form accurately and provide all the required documents.
- Loan appraisal and approval: The lender will appraise your car and assess your creditworthiness to determine your loan eligibility and interest rate.
- Loan agreement and disbursal: After approval, you will receive a loan agreement outlining the terms and conditions. Sign the agreement and receive the loan amount.
Looking for a personal loan?
You can also check other secured loan options from below:
| Loan Against Mutual Funds | Loan Against Securities |
|---|---|
| Loan Against Shares | Loan Against EPF |
| Loan Against LIC Policy | Loan on Credit Card |
| Loan Against Gold | Loan Against bonds |
| Loan Against SGB | Loan Against FD |
| Loan against PPF | Loan Against Agricultural Land |
| Loan Against Property | Loan Against Insurance Policy |
Frequently Asked Questions
A loan against a car is a secured loan that allows you to borrow money using your car as collateral.
A loan against a car allows you to borrow money using your car as collateral, providing funds while you retain ownership of the vehicle.
To be eligible for a loan against a car, you must meet the lender's requirements, which typically include age, income, credit history, and car ownership status.
The interest rate for a loan against a car typically ranges from 8% to 16%, depending on your creditworthiness, the type of car, and the loan tenure.
The amount you can borrow with a loan against your car depends on the vehicle's value, your creditworthiness, and the lender's policies, typically ranging from 50% to 80% of the car's appraised value
If you default on your loan against your car, the lender may repossess your vehicle to recoup their losses.
No, you cannot get a loan against your leased car because you do not own the car outright. The car's title belongs to the leasing company, and they are the only ones who can borrow money against it.
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