What happens to car loan if the car gets totaled loss in an accident?
Posted on: 29/Aug/2018 4:15:54 PM
Most of the people buying cars in India avail loan facility for this purchase. They repay the loan through EMIs (Equated Monthly Instalments). In this regard, many of us have the question as to what would happen to this loan in case the purchased car meets with an accident and gets damaged severely.
However, before trying to get informed about what happens to the loan in case of the accident, it is more advisable to know more about the car insurance schemes. An insurance amount is assessed on the car based on the model, year of purchase, and the present condition of the vehicle.
If the car in possession meets with an accident, the related amount will be compensated by the car insurance company. With this, the car can be repaired and a new insurance coverage can be processed. In this aspect, the car insurance companies categorise the cars which get severely damaged in the accident.
The insurance company will take the responsibility and pay a compensation amount depending on the value of the car prior to the accident and arrive at a percentage of this amount as compensation. However, if the repair charges exceed this specific amount, the insurance company will deem the car as a total damage. This percentage varies from one car insurance company to another. Most companies fix it at 80%. This means that the insurance company will come forward to pay the compensation based on the maximum amount of 80% of the cars value before the accident. On this basis, a full compensation for the damage repair cost will be paid. However, the owner needs to scrap the totally damaged car which caused a total loss in the authorized/approved scrap centre
A compensation amount will be paid by the scrap centre The scrap centre will also issue a certificate that the car has been given to the scrap centre and the specific compensation amount paid. This certificate will have to be handed over to the car insurance company which will deduct the amount the amount paid as the scrap value from the insurance amount and pay the balance. Some companies adopt the system of deducting a certain amount as a processing fee.
After learning about car insurance and related aspects, it is the right time to learn more about the car loan taken. A car loan is an amount given as a loan depending on the car value. So, there is absolutely no connection between the car loan and car accident. So, in case your car got totally damaged in the accident, you may pay the loan amount from the payment received as scrap value.
Mostly, it is a routine to make regular payment of the loan taken. So, there will not be a situation which may require you to pay the full car loan. Because of this, the insurance amount may just be sufficient to pay the loan.
As the car insurance companies pay up to 80% of the car value before the accident, this amount will be mostly sufficient as most of the cars which met with accidents do get repaired.
So, the major problem is only for those cars which got totally damaged in the accident. But, it is better to repeat here that there is absolutely no link between the car loan and accident-related issues. It is mandatory to repay the loan.
In case the amount paid by the insurance company is sufficient to pay the loan fully, you can very well do thehe same. However, in case you had failed to insure the car, you will be solely responsible to pay back the loan in full.
Because of the above aspects, please make note that in case the insurance period for the car is nearing completion; please renew the same without fail. Otherwise, it may lead to serious consequences of heavy losses.
