Car Loan EMI Options - Margin Money Scheme

The Margin Money Scheme is usually the most preferred and chosen loan scheme when buying an automobile on finance basis. In this arrangement, the bank or the financer will offer to loan maximum of 90 per cent of the total cost of the vehicle, while the buyer has to pay the remaining 10 per cent cost of the vehicle as margin payment to the bank or the financer along with the EMI for one month. It is a convenient set-up and offers the lowest amount of EMI amongst the various loan schemes available. The bank/financer also charges interest only on the loaned amount of the total cost of the vehicle.

The loan amount will vary depending upon the loan-to-value ratio, which cannot exceed 90 per cent of the total car cost. For instance, if a car costs Rs 5 lakh, the buyer will get loan from the bank for only Rs 4.5 lakh while the margin payment of remaining Rs 50,000 will have to be paid by the buyer of the vehicle. The bank will only charge interest on the loan-sanctioned amount and not the total cost of the vehicle. All banks offer the Margin Money Scheme and it is one of the easiest loans to opt for when applying for automobile finance.