• The repayment of the principal and interest components of a loan, over a period of time. Amortization sheet helps us in knowing the principal and interest component in any loan, it also helps us to know the loan tenure.

(EMI) Equated Monthly Installments are installment towards repayment of a loan, lease or hire-purchase agreement. As banks and finance companies conduct very high volumes of retail business it becomes easier for them to monitor and manage installments that are constant in amount. The EMIs are collected in advance as post-dated cheques, now a day ECS (electronic clearing system) is available where one has to give only 7-13 cheques depending on the loan tenure.

Loan amount*rate of interest*no of years+ loan amount/no of months

This is the method of calculating emi in reducing balance, in this type of calculation interest is charged on outstanding principal, more the principal more the interest component is there and vice versa, banks charge monthly, quarterly or annual reducing rate of interest as per their policy

These are the charges to be paid by customer while disbursing the loan amount; it depends on the loan amount and varies from .10% to 1% as per bank policy. This includes the stamp duty and franking charges.

A hypothecation is an equitable charge on the goods without possession, but not amounting to a mortgage. The contract is done to secure a debt. Banks that give you a loan to purchase a car hypothecate the car in their name as security. Once the total emis are cleared this agreement this hypothecation gets cleared.

This method is used by banks, there are two types of irr,bank irr and customer irr, customer irr is the rate at which customer is given loan and bank irr is the banks internal rate of return on that particular loan proposal. The internal rate of return of a project is the discount rate which makes its net present value equal to zero. The IRR method is a popular discounted cash flow method that takes into account the time value of money and also considers the cash flow stream in its entirety.

A customer gives post dated cheques to the bank for his loan repayment. When the monthly installment towards repayment of a loan is delayed the financier collects the installment along with the late payment charges. The late payment charge is also known as the delayed payment charges or the overdue payment charges. The late payment charges are fixed at the time of signing the finance contract. It varies from rupees 200 to rupees 500 depending on bank policy.

The tenure or the period of the lease agreement is known as lease term.

It’s the difference amount to be paid by the customer. It is the vehicle cost – loan amount today Most financiers finance Upto 90% of a car's value. The remaining has to be paid as a down payment which is also called the Margin Amount.

Most financiers collect post dated cheques towards the repayment of the lease rentals or the installments (EMIs) for a lease/hire-purchase/loan contract. The post dated cheques not only provide convenience, but also protect the financiers by making the issuer of the cheques liable to honor them as per the Negotiable Instruments Act.

As a matter of precaution, the lessee/hirer/borrower is required to execute an unconditional promissory note in favor of the financier, for full amount of the installments / rentals payable under the agreement. The promissory note is counter-guaranteed by the guarantor where applicable.

A security deposit is typical to hire-purchase agreements offered by banking and non-banking finance companies. Here the customer, is offered finance Upto 2 times of the amount he has fixed with the bank, this scheme is now a days running very successfully and is very much beneficial to customers in terms of interest and for the bankers in the form of security in the form of fixed deposit and even vehicle is mortgaged.

These are the charges for prepayment of loan; it differs from 2% to 5 % of the outstanding principal. Here customer gets benefit of the outstanding interest as total interest is waved off.

Do’s and don’ts : please be sure to follow these rules

No finance charges are required to take any loan

Pay the down payment at car dealership only

Don’t give original documents to any executive

Confirm identity of executive who is completing your loan proposal

Give your documents to authorized DSA (direct sales agents appointed by Banks) they give you doorstep service and even pass on their margins to you.

In case of used cars, confirm the history of the vehicle and check the original documents and then do the deal.(you can also avail carkharido.com certification where you get the valuation and actual condition of vehicle with nominal fees paid by you

Give post dated cheques after approval of loan (account pay only) and mentioning the bank name from where you apply loan.