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Car Credit - Explained...

20 February 2015, 06:30 PM

The idea behind the car loan is to provide ease at which you can pay for your car in feasible monthly amounts, instead of paying a hefty amount at one ago. In the whole process, the important word EMI stands for Equated Monthly Installments. There is no denying that car finance in India has played an important role in the growth of automotive industry. This has allowed more people to buy cars in the country. In fact, car aspirants are now opting for premium cars due to ease of repayment options. The total amount of the car credit along with the interest is divided into fixed monthly installments. Customer has an option of either deducting the EMI directly from the owners’ bank account or via post-dated cheques.

Cheques given to the bank towards the repayment of Equated Monthly Installments is known as PDC or Post-dated cheques. All the PDCs are dated for each month of the loan period with owner’s signature. This further ensures the finance provider that the person taking the car loan is accountable to honour the monthly payments.

However, Banks or auto financiers do not offer the total price of the car. They usually finance up to 80-90 per cent of the vehicle’s value. The remaining amount needs to be pay by the buyer directly to the car dealership that is known as down payment or the margin amount.            

If buyer delays the monthly installment towards repayment of a loan, the financier will collect the installment along with the late payment charges. The delayed payment charges or the overdue payment charges are fixed at the time of acknowledging the finance contract.

If you are taking loans on company or business, the credit rating agency evaluates the credit worthiness of your company and not the individual. Known as credit rating, the evaluation is made by credit rating agency of the borrower’s ability to repay the debt.

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