Vehicle loans are given for both used as well as own vehicles. However, if the loan is being taken for used vehicle then it is mandatory that it is not more than five years old. Although some banks provide 100% finance, however financing 80% of the vehicle value is usually the norm. The main security for this type of loan is the vehicle itself. However, getting the vehicles fully insured is the most important factor that banks consider before giving vehicle loans.

1. Vehicle Loans
Introduction
Eligibility and Quantum
Rate of Interest and Repayment
Security and Insurance
Vehicle Loans Retail Banking Chapter 13

2. Introduction
As the name suggest the vehicle loans are provided for
purchase of vehicle. The vehicle may be new or used. The used
vehicles should not be old than 5 years. The same is provided for
private, professional or business use. The scope of vehicle loan
can be elaborated by following chart
Vehicle Loans
Eligibility Quantum
Rate of Interest Repayment
Security Insurance
Vehicle Loans Retail Banking Chapter 13

3. Eligibility and Quantum
The eligibility for vehicle loans is the customer should be
between 21 to 60 years. His ability to repay along with his
employment status in case of salaried person. In addition to this
the net take home/disposable income also be checked. In case of
professionals like Doctors, lawyers, businessman etc. their
income should be adequate to pay the monthly installment. Now
a day some banks provide the 100% finance. But usually 80% of
the cost/invoice value in financed.
Vehicle Loans Retail Banking Chapter 13

4. Rate of Interest and Repayment
The rate of interest is vary from bank to bank.
The repayment of such loans is between 36 to 60 months. i.e. in
3 to 5 years in equated monthly installments along with interest
charged for the finance.
The customer may opt for foreclosure of loan also. Some
banks charges penalty for that if it is foreclose in 12 months
from date of repayment.
Vehicle Loans Retail Banking Chapter 13

5. Security and Insurance
The main security for this type of loan is a vehicle itself.
The vehicle which is financed is hypothecated as a security. In
addition to this the hire purchase is noted in the registration
book issued by the Regional Transportation Officer. Some banks
insist on guarantor for this loan. The guarantor is person who is
well known to bank or he is having good transaction record at
the bank.
The insurance is most important factor. Purchased
vehicle must be comprehensively insured to its full value.
Having the clause stating that if it is damaged beyond repair,
the insurance company paid claim amount to the bank.
Vehicle Loans Retail Banking Chapter 13

6. “Like” us on Facebook:
http://www.facebook.com/welearnindia
“Follow” us on Twitter:
http://twitter.com/WeLearnIndia
Watch informative videos on Youtube:
http://www.youtube.com/WelingkarDLP