Now that you have decided to buy a car there are 8 THINGS YOU MUST KNOW BEFORE CHOOSING A CAR LOAN.
Although this is taken as the least important point to choose for a car loan but this is the key point to go further, since your eligibility and your potential for down payment is only decided after your credit score is equated. Check your credit-worthiness by checking your CIBIL score. Higher score means a better chance of loan approval. One will have a probability of 90% approval of the loan if he/she has a score above 700.
2. Down Payment
All Most all banks will offer 85 to 90% financing on the on-road price or Ex showroom price of the car. A Preferred or an old customer may get a 100% financing option. Try to keep your down payment as high as you can afford as it will help you to keep your EMIs and interest component low.
3. EMI and Loan Tenure
Your EMI and loan tenure will depend on the amount of down payment that you make and loan needed. To keep the EMI and Loan tenure low, one needs to keep the down payment as high as you can afford.
The current interest rates on Car loan for most of the banks is around 9 to 11%. Most of the banks offer fixed interest rates on car loans. One can go for floating rates, but these rates will vary if there is a change in policy and bank rates may move up and down. So choose carefully.
5. Foreclosure Charges
Always consider what kind of foreclosure charges that you have to pay in case you are not able to pay back the loan.
6. Dealer Advantage
This is the last but not the least point since this can impact your EMI and all the factors, why to say this is because today’s with the increase in competition between the dealers they tend to leverage good discount offers and nice complementary options to make your more happier at the end.
7. Buy Your Own Insurance:
Before making the final purchase, you will know the finer details of the car such as the model number, cost and other details. With these specifications, you can do some home-work on car insurance before sealing your purchase. Once you get the premium quotes, you will be able to compare them with insurance deals offered by dealers and this will have direct impact on your loan if your loan has insurance price covered in it.
8. Processing Fees — Lesser the Better
This is one area where you can try to negotiate with a bank. Depending upon the size of the loan, processing fee typically varies between Rs 2,000 – Rs 5,000. This may look like a small amount. However, car loans are small ticket loans too.