Knowing the Seamy Side of Car Loans
Missing the finer points of terms of a loan agreement can land one in a financial and legal mess. It is extremely important to study the loan document to avoid any shock down the line. Let us think of a situation when a person applies for car loan from a bank. The bank after processing the car loan application get about sanctioning the loan amount if it passes the test and the date of disbursal of the loan amount is very material. The point which merits serious consideration the effective date for the purpose of calculation of interest on the car loan would be the date of disbursal.
The Car Loan and the Car Dealer
The bank releases the loan amount in favor of the car dealer. And here the complexity starts. One may be faced with a situation when the car dealer receives the car loan amount but fails to deliver the car. And the prospective car owner may have a valid complaint from the moral point of view but legally his or her case may not be tenable when the lending bank calls upon him to bear interest for the intervening period of disbursal of the car loan and actual delivery. Thus it makes a lot of sense to get one's car loan application approved but asking the bank or any financing company not to disburse the car loan. Alternatively one has to make sure the car which one intends to purchase is ready for delivery to coincide with date of approval of the car loan.
Distinguishing a Car Loan From a Home loan
A full amount of a home loan is never disbursed by any bank unless the property is registered in the name of the borrower. The reason is obvious enough. The bank can not proceed to get the property mortgaged or charged in its favor until the process of registration is over. Thus, for a home loan the actual EMI payment begins after the completion of the construction and registration process. There are situation when a home loan is sought for a property which is under construction and the bank agrees to finance such a home loan for which the borrower pays pre-EMI interest. But the car loan is somewhat different as the bank disburses the full amount on the basis of an undertaking on the part of the borrower that he would create a lien or hypothecate the car once it comes into his or her possession. It is clear enough the bank is not willing to take any responsibility in ensuring timely delivery of the car while it charges interest from the date of disbursal of the car loan.