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Old 24th December 2008, 00:04   #1
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Default Car loans to freelancers?

Hey Guys,

I am working as a Freelance Writer and Internet Researcher. I get my projects thru freelancing websites and get paid thru paypal (it's one of the ways to pay and get paid online), which I then transfer to my local bank a/c.

I booked a new Hyundai i10 and would be submitting requisite documents (PAN, bank statements, electricity bill, Form 16 for the previous year etc.) to the dealer to check if I can get a loan (apparently, most dealers have tie ups with banks for car loans). I also checked on my own with ICICI (I have a savings bank a/c with them) to see if I qualify for a pre-approved car loan, which I didn't, since I no longer have a salaried a/c there.

Will other banks approve a car loan to me, in absence of a salaried account? I am self-employed but don't have any papers to show this. If it helps, my sister has a salaried a/c with Citibank. Can she sign up as a co-applicant or guarantor if I apply thru Citibank? How about Nationalised banks? My dad (who is retired and qualifies as a senior citizen) has a savings bank a/c with Bank of Maharashtra.

Of course, I'll check with all the banks tomorrow but was hoping if someone with my profile could chip in with their experiences/suggestions.

Thanks!
Naresh
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Old 24th December 2008, 17:11   #2
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As long as you are transferring the paypal funds to an Indian account and filing tax returns each year, I don't see why it should not be possible. However, it's hard enough for straight-forward corporate types to get loans these days, credit crunch et all.....you will certainly have some time explaining the paypal concept to your branch manager . Expect a little more effort than usual.
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Old 24th December 2008, 17:34   #3
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Thanks GTO. I'll check with ICICI again. Turned out that Citibank has stopped giving car loans altogether for the past many months and Bank Of Maharashtra refused me. Finally, my sales guy arranged for a loan from Kotak Mahindra wherein, my sis' would be the co-applicant (or was it guarantor?). Would be submitting both our documents tomorrow.

This is what Kotak offered me:

Loan: 2.5 lacs (I chose)
Term: 24 months (I chose)
EMI: Rs. 12,180
Processing Fee: Rs. 3500
Stamp Duty: Rs. 1950

So, the rate of interest comes to around 14.9% which obviously is relatively high. I'll have no choice but to go for it, if nothing else works out.
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Old 24th December 2008, 17:52   #4
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From my personal experience, I can tell you that it's not going to be easy. Technically, if you have your IT returns and other documents in place, there shouldn't be a problem but the reality is quite different.

Infact when I bought my first car (and my second), I had to get the loan in my mom's name and then in my dad's name despite the fact that my annual income was 5 times more than their combined income. But somehow the banks felt safer giving out the loan to my mom who was due for retirement in 12 months and my dad who had already retired just because they were university professors
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Old 24th December 2008, 17:55   #5
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Quote:
Originally Posted by Astleviz View Post
From my personal experience, I can tell you that it's not going to be easy. Technically, if you have your IT returns and other documents in place, there shouldn't be a problem but the reality is quite different.

Infact when I bought my first car (and my second), I had to get the loan in my mom's name and then in my dad's name despite the fact that my annual income was 5 times more than their combined income. But somehow the banks felt safer giving out the loan to my mom who was due for retirement in 12 months and my dad who had already retired just because they were university professors
Thanks for sharing your experience, Astleviz. I'll check with a few more banks tomorrow.
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Old 24th December 2008, 18:05   #6
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Originally Posted by NK@Hyd View Post
Hey Guys,

I am working as a Freelance Writer and Internet Researcher. I get my projects thru freelancing websites and get paid thru paypal (it's one of the ways to pay and get paid online), which I then transfer to my local bank a/c.

I booked a new Hyundai i10 and would be submitting requisite documents (PAN, bank statements, electricity bill, Form 16 for the previous year etc.) to the dealer to check if I can get a loan (apparently, most dealers have tie ups with banks for car loans). I also checked on my own with ICICI (I have a savings bank a/c with them) to see if I qualify for a pre-approved car loan, which I didn't, since I no longer have a salaried a/c there.

Will other banks approve a car loan to me, in absence of a salaried account? I am self-employed but don't have any papers to show this. If it helps, my sister has a salaried a/c with Citibank. Can she sign up as a co-applicant or guarantor if I apply thru Citibank? How about Nationalised banks? My dad (who is retired and qualifies as a senior citizen) has a savings bank a/c with Bank of Maharashtra.

Of course, I'll check with all the banks tomorrow but was hoping if someone with my profile could chip in with their experiences/suggestions.

Thanks!
Naresh
You need to think like a bank.

You might get a loan based on your IT returns, if you have filed them, but your percentage of funding for the car will vary (come down) drastically and the risk component that the bank envisages (in your case) would be higher. 2 years of it returns should gaurantee a loan but percentage of Loan to value might be less.

There are certain non banking financiers who also fund a loan, but not advisable to approach one.

Try a few NBFCs and you might end up in a deal.

Always calculate the EMI that you would be paying against benchmarked Bank rates. The dealer might push a deal with heavy interest rates to sell the car. Beware!!!

The last resort: If you can find a gaurantor with a steady income (salaried) who can place a gaurantee for you, then your problem is solved. The car can be in your name but the monthly installments would be from his bank account. If that is complex, then dont try this. In my case, my brother is a freelance PM and he gets paid in wire transfers and files IT returns but in the Vehicle loan, I signed as the gaurantor and he took the car. The EMI vanishes from my account (Which my bro pays for). In this case, we have the lovest interest rates and the car delivered in no time.
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Old 24th December 2008, 18:22   #7
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Also kindly consider a loan that has the least pre-payment penalty so that you can retire the 15% nonsense rate they are heaping on you. There's no other place for your money than to retire this 15% - no better investment.

Prepayment and minimum upfront fees (even at a higher interest rate ) would be key IMO.
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Old 24th December 2008, 21:23   #8
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Originally Posted by kbalii View Post

The last resort: If you can find a gaurantor with a steady income (salaried) who can place a gaurantee for you, then your problem is solved. The car can be in your name but the monthly installments would be from his bank account. If that is complex, then dont try this. In my case, my brother is a freelance PM and he gets paid in wire transfers and files IT returns but in the Vehicle loan, I signed as the gaurantor and he took the car. The EMI vanishes from my account (Which my bro pays for). In this case, we have the lovest interest rates and the car delivered in no time.
Interesting you mentioned that, as mine is an exact scenario. The EMIs would be deducted from my sister's salaried account but the car would be in my name, as she would sign up as a co-applicant (is 'guarantor' the same or should I specifically ask that she would be a guarantor and not a co-applicant?). The only difference is the exorbitant ROI and Processing & Stamp charges in my case. The sales guy said they are just a mediator and don't get any cut from the bank, but should I directly check with Kotak too? I think I will, tomorrow. Can you please share which bank did you take the loan from?

Thanks!

Quote:
Originally Posted by phamilyman View Post
Also kindly consider a loan that has the least pre-payment penalty so that you can retire the 15% nonsense rate they are heaping on you. There's no other place for your money than to retire this 15% - no better investment.

Prepayment and minimum upfront fees (even at a higher interest rate ) would be key IMO.
I think I would atleast negotiate for a low/no pre-payment penalty with them, if nothing else. Thanks for the advice!

One other alternative is to book the car in my sister's name. Since she's a salaried employee, she should get a car loan at favourable rates (not from her salaried account though, Citibank has stopped Car loan facility ). The only issue is, I would be doing most or all of the driving. Could it be a problem (from road transport rules or any other laws' perspective) since RC and Insurance would be in her name? Is there a provision of getting my name in the RC/Insurance as a co-driver?

By the way, I do have a car license

Last edited by Rehaan : 25th December 2008 at 19:35. Reason: Posts merged. Please use the MULTIQUOTE button instead of making multiple consecutive posts in the same thread.
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Old 26th December 2008, 19:07   #9
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Try to get your loan from HDFC bank. They seem to offer the lowest interst rates apart from SBI.

Try to avoid the car being in your sister's name, that would hamper her credibility if she wants to go for a car. Please have the car in your name. There is something called dealer subvention but you dont have to worry about that. Thats

And yes co applicant and gaurantor are the same.

All the best!!! Enjoy the Ride.
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Old 26th December 2008, 23:06   #10
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I finally sent my loan application thru an ICICI DSA. These are the loan details:

ROI: 15.5%
Processing charges: Waived off
Stamp Duty: Rs. 1250/-
Prepayment penalty: 3%

Got my sister to sign up as a co-applicant, so the car would be in my name (interestingly, when I had directly enquired with ICICI, they had refused me and said they don't have any system of co-applicants). If everything goes smoothly (read: the loan gets approved), I should have the car in my parking by the 30th. There goes my dad again to see if the date is auspicious

Thanks for all your inputs, guys!
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Old 27th December 2008, 00:36   #11
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Hold on brother. I have a solution. ask your family to gather finances, and take a loan against FD. Then instead of paying the bank 15% post tax, you can instead pay your family back.

The above is valid ONLY if you are capable of repaying the loan within a coupla years, or if they are constrained for cash. The good thing about FD, is that it monetises your cash, and lets you pay back family with zero prepayment charges (check the other thread man)
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Old 27th December 2008, 19:51   #12
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Originally Posted by phamilyman View Post
Hold on brother. I have a solution. ask your family to gather finances, and take a loan against FD. Then instead of paying the bank 15% post tax, you can instead pay your family back.

The above is valid ONLY if you are capable of repaying the loan within a coupla years, or if they are constrained for cash. The good thing about FD, is that it monetises your cash, and lets you pay back family with zero prepayment charges (check the other thread man)
Thanks buddy. Never knew about loan against FD. I will definitely give it a thought. Really appreciate your advice.
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Old 6th January 2009, 13:27   #13
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Hi Guys,

Just wanted to give you the update...I finally got the loan approved, completed the paperwork and am now a proud owner of a deep ocean blue coloured Hyundai i10 Magna.

Thanks to everyone who contributed to this thread.
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