KK Start Up India Provides Car Loan.

Car Loan , Defined

A car loan is pretty much what you think it is: It is a personal loan, the proceeds of which are used to purchase an automobile. More specifically, a lender loans the borrower (you) the cash it takes to purchase a vehicle. In return, the borrower agrees to pay back the lender the amount of the loan plus interest, usually in monthly payments, until the amount owed is fully paid off. Pretty simple, so far.

Oftentimes, a personal loan is an unsecured loan. That is, the loan is made purely on the basis of the borrower's trustworthiness, and not secured by some form of collateral. Car loans are different in that they are almost always secured loans, whose collateral is the vehicle itself. And that means that if the borrower fails to make his or her payments, the vehicle will be repossessed and sold to pay off the loan debt.

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The Four Basic Building Blocks of a Car Loan

  • 1. Loan Cost: There are two basic parts to the cost of a car loan: the principal and the interest. The principal is the negotiated cost of the vehicle itself. The interest refers to the total amount of the costs accrued over the life of the loan based on the principal amount and the stated interest rate.
  • 2. Interest Rate: An interest rate is a basic rate charged to the borrower for the money loaned. The interest rate is normally expressed as a percentage for a one-year period and known as the annual percentage rate (APR).
  • 3. Down Payment: The down payment is an upfront amount of cash paid by the borrower at the time of the purchase of the vehicle. It is usually expressed in terms of a percentage of the total price. It is not a legal requirement when taking out a car loan, but is almost always required by the lender.
  • 4. Terms and Conditions: This refers to all of the other items that make up a car loan, including the term of the loan, normally stated in a number of months or years; insurance and registration requirements; loan payoff and resale terms; maintenance requirements; conditions regarding theft or accident; and conditions of loan default and repossession. There are many other such conditions, and a borrower is well advised to read them over carefully and have a clear understanding of what they mean before signing on.
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