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As with almost any loan, an auto loan consists of two distinct parts: the principal and the interest. The principal is the amount of money that is lent and is determined by the value of the vehicle. For instance, if you are using an auto loan to purchase a used truck that costs Rs.2,00,000, then the principal amount for your loan would also be Rs. 2,00,000.

The interest on the other hand, is the amount of money that the lender is charging you on top of amount lent. It is essentially the “cost” of the loan, or how much the lender is charging you for the privilege of borrowing money. Generally, interest is expressed as an interest rate, which is a certain percentage of the principal over a certain period of time.

Your repayment capacity is based on your monthly disposable/surplus income, which, in turn, is based on factors such as total monthly income/surplus less monthly expenses, and other factors like spouse's income, assets, liabilities, stability of income, etc.

Auto loans are typically structured as installment loans, which means that the loan is paid off in a series of regular (usually monthly) payments.

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