I’m planning to get a car loan in another two months. I’m looking out for options. Can you please guide me what factors I should look in before getting a car loan? Kindly guide me.
Before getting a Car Loan, consider the following factors:
The rate of interest is one of the most important factors to consider as it will decide your monthly EMI outgo. Since the figure varies from bank to bank, it is wise to do a comparison of interest rate offerings of different banks to bag a good deal. A lower interest rate means lower EMI and lower amount of interest to be paid. You can also get a good deal if you maintain a healthy Credit Score. Negotiating a good deal would not be tough if you have good terms with your bank.
Processing Fee Charges
The processing fee is the percentage of your loan amount that banks charge for processing your loan. It varies from bank to bank. Many banks often waive off the processing charges through special offers or discounts. When a bank waives off your processing fees, be cautious and do check that no other charged has been introduced or a higher interest rate has been charged to offset their loss.
Know The P re-closure Charges
There are some banks which levy pre-closure or pre-payment charges. While selecting a lender for your Car Loan, you should check about the pre-payment charges. It would be wise to read all the documents to avoid falling prey to hidden charges. Clearing your debt before the end of the loan tenure is not a crime, however, you should not be penalized unnecessarily for such a good deed.
Car Loans nowadays are available for up to 100% of the ex-showroom cost of the vehicle. While this may appear to be a great and attractive option, but it means that you will have to pay higher EMIs to clear the debt. While looking for a Car Loan, try to arrange for a down payment that can keep the EMIs lower. You should also opt for a shorter tenure to reduce your interest cost. This may mean higher EMIs, but do it only when you are not compromising on your other financial and investment goals. It would be wise to go for a loan only after you have saved enough for your Car Loan down payment. For example, if you are looking for a Car Loan worth Rs. 7 Lakhs with an interest rate of 12.5% for a 5-year tenure, the total interest payment will come to Rs. 2,44,913. Now if you down pay Rs. 2 lakhs and seek a loan of Rs. 5 lakhs, the interest component comes down to 1, 74,938 resulting in a saving of Rs. 69,975.
Ensure Loan EMI Stays Within Payable Limit
EMI affordability is another factor that you should certainly check before taking a loan. You should assess and calculate all your expenses before taking a call on how much Car Loan EMI you can afford. It will be wise to ensure that your Car Loan EMI along with any other existing EMIs (home or any other loan) do not cross 40% of your monthly income. You can also choose to close any unwanted loans before applying for a Car Loan to ensure you stay below the threshold limit for easy repayment without facing any financial burden.
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A car loan is a type of a secured loan that is offered by many Banks and Non-Banking Financial Companies (NBFCs) to enable an individual afford their dream car with ease. Most individual’s dream of owning their own car, but many cannot afford to pay for the same in one shot as it can be a lump sum loss of one’s savings. So, New car loan enables an individual to buy a car without it taking a huge toll on one’s savings as one can repay a car loan in monthly installments for a certain chosen tenure.
So, when one decides on what car he/she would like to buy, he/she can apply for a car loan for the same. There are many Banks and Non-Banking Financial Companies (NBFCs) that fund up to 100% of the vehicle’s on-road price. One can make a down payment for the car to reduce the loan amount and then get a car loan sanctioned for the remaining amount. One needs to ensure that he/she meets the eligibility criteria of the bank and provide the needed documents for the same. The individual can then choose the tenure, EMI and repayment option and repay the loan in full in time.