LTV is Loan to Value. LTV on Car loan is the amount of money, that can be approved to the borrower as a loan to the value of the vehicle being purchased. Various banks practice different norms for determining LTV on car loans.
In India, LTV for used or old cars is much lower as compared to that of the new cars, as banks or other agencies prefer financing new cars. Additionally fixing LTV for a new car is reasonably easier than carrying out the same procedure for used cars because the rate of a used car cannot be calculated accurately.
Many components like wholesale price, condition of the car, etc. are taken care of while calculating its value as the financing agent wants to be safe and not over finance the used car.
Implications of LTV %
In the case of a car loan, LTV can be calculated as Loan to Value (LTV) = Amount Sanctioned/Vehicle Value.
LTV = 1 means that 100% of the cost of the vehicle is sanctioned by the financing agent through the car loan. This suggests that the borrower has not made any down payment before getting a loan. More is the figure of LTV; lesser is the amount contributed by the customer towards his purchase. LTV in no case must exceed the value 1 as it implies that the customer has tricked the bank by getting more amount than required.
LTV on Car Loan in India
In general, the LTV on new cars in India is around 80%, which can reach up to 90% maximum in selected cases, whereas for used cars, the LTV drops to around 60-79%. The division of the car being purchased, credit rating, and the EMI payment capacity of the borrower, are some factors that determine LTV on car loans.
The banks may provide 100% finance on all the costs related to vehicles including the on-road price for salaried especially for those working in well-established and reputed public organizations. The banks have the unrestricted powers to increase or decrease the Loan to Value (LTV) on a car depending upon the depiction of the borrower.
RBI has fixed some guidelines for LTV on home loans in India, but in the case of car loans, there are many deviations. It is now up to the applicant to pick the amount, he wants to borrow.
However, it is advisable for the borrower to avail lesser finances from banks as in India, the Car Loan Interest Rate is high, and the resources are depreciating. So it is better to use accessible funds, as much as possible to take down the payment.
You can avail Car Loans with DialaBank without any hesitation and get the best deal and offers in the market.
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