Tackling the slowdown in the automotive sector, auto-manufacturers are leaving no stone unturned. Various schemes have been introduced that make buying a car more lucrative such as free insurance, cash discounts, extended warranty and more. Of them all, finance schemes are most sought by the buyers, and that forms the final step in getting home your dream car, the price you pay for it. On that note, let us have a look at the points to consider when you avail a car loan –
Credit Score Evaluation
One needs to ensure they have a good credit history with the various lenders for all previous borrowing; whether a credit card or other forms of loans. The rate of interest offered to you is mostly decided based on your credit score. Generally, a score of 750 or above is considered good, and loan sanctions are easily made. You can fetch your credit report from the credit bureau or your bank to know about it.
Comparing Among The Lenders
Before finalising any lender, make sure you compare among the different lenders that offer finance for a car loan. Most buyers restrict themselves to the interest parameter. Other factors while selecting a loan that needs to be considered are processing fees, loan tenure, prepayment charges, etc. With the slowdown in the auto sector, automakers have introduced 100% financing, waiver of processing fee and faster disbursal of loans. Such a scenario makes the loan buyers act with due diligence and select a lender with the lowest charges.
Making Sufficient Downpayment
Making adequate downpayment helps in minimizing the amount of borrowings. With the rise in offers like ‘zero down payment ‘, you may end up paying a higher sum as otherwise that you would pay. Zero down payment is also known as 100% finance scheme, which are marketing strategies to attract customers. The more the downpayment you make, the lesser is the interest you end up paying to the financer. Car Loan interest rates generally range between 9% to 15%.
Selecting The Right Tenure
When you avail a vehicle loan, make sure you choose the right tenure for yourself. Lenders offer as long as seven years of tenure, but shorter duration loans help in reducing the interest component. But a word of caution, shorter car loan requires higher EMI contributions, it shall affect your overall liquidity.
Understanding the Hidden Charges
The processing fee is the cost the lenders charge to cover application evaluation charges. It is a non-refundable fee and can be as high as Rs 10,000. The processing fee for your car loan is mentioned in the fine print. Make sure the waiver in such processing fees is not compensated by an increase in the interest rate or other charges.
Other charges that are usually needed to be taken into consideration are foreclosure or prepayment charges. A few lenders who lend on a fixed rate of interest levy prepayment charges which can be as high as 6% of the outstanding loan amount. On the other hand, there is a capping on the number and amount of prepayment that can be made in case of certain lenders. Thus, while availing a car loan, make sure you take into consideration these things mentioned in the fine print.
With the internet revolution in the country, one can compare the best car loan online and select the one that is available at the lowest charges helping you save more. Make sure you keep in mind the points mentioned above that can help you in applying for a loan at effective prices.
