Stamp Duty on Car Loan Agreement

Buying a car involves various hassles and unfamiliarity with taxes and legal charges can add wheels within wheels to your dreams of a four-wheel drive. With the expertise of financial institutions who offer car loans, proper knowledge of stamp duty and impending legal charges be availed.

Stamp duty on a car loan agreement is a variable factor in different states of the country. Hence, it plays a vital role when one applies for a car loan.

If you are puzzled about the stamp duty on a car loan agreement, this blog will help clear the confusion.

Let’s begin!

What Is Stamp Duty on Car Loan?

Stamp duty is an amount that in a way affects both the borrower and the lender of the loan. This is amongst the other charges that are levied on the agreement signed by both parties. i.e the government of a particular state. Stamp duty is primarily a direct tax levied by the government of a particular state to legalise the asset in a transaction.

What Is the Charge of Stamp Duty on Car Loan Agreement?

Normally, the stamp duty on car loan agreements varies between 5% – 8% where you are also supposed to pay an additional charge of 1% as a part of your registration charge. However, the charge may vary from bank to bank. 

Processing Charges on a Car Loan

1. Processing charges on the car loan is basically the one-time payment that the loan borrower makes to get their application form processed.
2. A processing fee is never included in the loan amount that you need to pay, rather it’s an amount you must pay separately.
3. Other than the processing fee, there are other charges that are levied on your car loan, these are as follows 
   • Interest Rate 
   • Late Payment Charge 
   • Swap Charges
   • Service Charges 
   • Part -Payment Fee 
   • Stamp Duty
4. Among all the other charges mentioned above, the service fee & interest rate are 2 such charges that are levied on your car loan with the GST. 
5. At present, all the banks in the country are offering very less processing charges i.e., INR 500, whereas SBI offers 0.20% of your total loan amount. 
6. The fees and charges on your car loan differ for all financial lenders all across India. 

Banks and their Processing Charge on Loan Amount

Different Kinds of Fees and Charges

There are various charges levied on a buyer for the car loan. Some of these charges & fees are explained as below: 

1. Interest Rate: An interest rate on a car loan is basically the amount that the lenders charge from the car loan borrowers according to their eligibility. At present, the range of these interest rates is somewhere between 8.65% – 20%
2. Pre-closure Charge: Pre-closure fee is levied on a borrower when they pay their entire loan amount even before the tenure is completed. In such cases, the interest rate gets lower for the borrower whereas it reduces the income that the bank generates from such interest. Therefore, a pre-closure is basically a fee that the lenders charge in order to compensate for the loss that they bear for getting their interest rate. However, some banks only charge nominal fees.The fee of such pre-closure lies somewhere in between 0 – 5% 
3. Processing Fee: It is the one-time payment that is supposed to be made by the borrowers of the car loan to its lenders. This processing fee is not included in the total amount of the loan, rather it’s an amount that needs to be paid separately to get your application form processed.

Stamp Duty Charges in Other States

Processing Fee Charges :

• Processing Fee when the loan is bought for New Car: Starts from INR 250 
• Processing Fee when the loan is bought for Old Car: Starts from INR 250 
• You will even find some banks that charge 0 processing fees. 

1. Part Prepayment Fees: It is done in cases when borrowers tend to pay their certain amount of shares to the bank before it’s the due date. Doing so helps the borrowers to get their rate of interest reduced whereas this reduces the interest income that banks generate from such loans. In order to get this covered, the bank charges a certain amount on pre-payment of the loan amount which is known as Part Pre-Payment Fee. 
2. Late Payment Fees: This is the amount that gets charged to the borrower when they fail to make their EMI payments on time. There is no kind of fixed charge that is levied on such failure of payment, but the charge starts somewhere from 2% every month. 
3. Other Charges: Apart from the types of charges mentioned there are other charges that are levied on borrowers through the lenders, these charges are as follows: 

• Stamp Duty 
• Levies
• Swap Charges 
• Cancellation charges on the car loan
• Service Charge 
• Bounce Charge
• Renewal Charge 
• GST 
• Other taxes levied by the government. 

FAQ’s about Stamp Duty on Car Loan Agreement