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The various schemes available for financing the car are:
MARGIN MONEY SCHEME:
Margin Money scheme is the most popular of all car finance schemes. The finance offered is based on the total value of the car. The amount financed can vary from 90% of the car value to 70%, as per the financier's eligibility criteria. The balance amount has to be paid by the customer as margin amount or down payment. Interest is charged only on the amount financed. The repayment of the loan is made by EMIs at the end of each month through post-dated cheques, which are collected at the time of signing the contract. Both, banks and finance companies (NBFCs) offer this scheme.
SECURITY DEPOSIT SCHEME:
Under this scheme, you get 100% of the car's value as the finance amount, on keeping a security deposit with the financier. The security deposit may vary from 10% to 35% of the finance amount. One EMI is to be paid initially and the balance EMIs are paid at the start of subsequent months by post-dated cheques. The security deposit earns an interest, simple or compound, throughout the finance tenure. The security deposit, along with this interest earned on the deposit, is refunded to the customer.
ADVANCED EMI SCHEME:
It is another version of the margin money scheme. The bank offers to give the complete amount as loan, but requires you to pay some amount as an additional installment in the form of the first month's EMI along with the margin / down payment. Usually 2 to 5 instalments are collected in advance. The balance EMIs are paid at the start of subsequent months through post-dated cheques. |
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