Consider getting a car loan, remember these points

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HIGHLIGHTS

  • Although up to 100% financing is available in the market, as a customer you should try to keep the loan amount according to your specific needs.
  • It is essential to remember that the key is to get a loan within a stipulated time. It is advisable to evaluate the different rates before taking out a loan.
  • Although tenure of up to 7 years is available in the market, all you need to do is take out a car loan for a period you are comfortable with.

New Delhi: Buying a car is a defining moment in life. Perhaps this is a decision in which the whole family participates, and the opinion of close family and friends is sought before making a final decision. It should be remembered that although a car is an asset, it is also a liability until the end of the loan period. Therefore, one should not choose a loan ad hoc but rather keep the following points in mind when choosing a loan.

Are you a pre-approved customer? Being a healthy bank customer has certain advantages. If you’re a good customer of your existing bank, chances are you’ll have a pre-approved car loan under your name. Using pre-approved auto loans is usually simple and efficient with little paperwork and time. Bhaskar Karkera, Head of Wheels, AU Small Finance Bank, explained the key points when availing a car loan.

A healthy credit score = faster processing and approval

Maintaining a healthy credit rating is of utmost importance when seeking faster loan approvals and processing. Having a credit score above 750 helps you get the best deal and says a lot about your financial health. Your bank tends to trust you as a reliable borrower. It should be noted that one may benefit from a better interest rate and/or a higher sanction of the loan amount, given a higher credit rating.

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Correct loan amount

For a car loan, remember that the average loan amount is usually between 75 and 85% of the value of the car. Although up to 100% financing is available in the market, as a customer you should try to keep the loan amount according to your specific needs. This is crucial as higher funding would result in increased EMIs and interest paid over the period. Prudence in identifying the right loan amount can ensure that paying off your loan is a pleasant experience.

Choose a loan that suits your needs

Most customers tend to only look at the interest rate and other fees when considering a loan funder. There are some other finer points to consider as well, such as customer service, loan processing time, hassle-free process – all crucial factors that we tend to overlook. It is essential to remember that the key is to get a loan within a stipulated time. It is advisable to evaluate the different rates before taking out a loan. Many websites offer simple EMI calculators.

Don’t limit your choices

You can avail new car loans as well as used car loans. Just because everyone you know is buying a new car doesn’t mean you’re doing the same. If you want a particular car but are worried that a new car will burn a hole in your pocket, then you can look at used car options. The used car space is organizing quickly with easy financing available at attractive rates. Moreover, the point to note is that in a used car these days, the warranty is also provided by the organized car dealerships who can additionally provide you with the convenience of owning the same.

The devil is in the details

The interest rate to be paid and the term of the loan are key parameters to evaluate before committing to a car loan. Although tenure of up to 7 years is available in the market, one only needs to take out a car loan for a period one is comfortable with. Also, a crucial factor to note when determining the EMI payment for an auto loan is to check if other existing loan EMIs are manageable for you.

As an informed customer, always check whether the financier/lender charges foreclosure fees. There are several financiers who do not charge foreclosure after a specified period of the loan is over.

It’s important that you buy your car from a dealership that has a healthy relationship with a bank that can provide you with financing offers. Car dealerships have different ties with different lenders. Accurate and complete documentation must be ensured for a hassle-free experience.

While availing a car loan, make informed decisions and consider carefully. You can wrap a personalized offer. Do extensive research. Come prepared to be in the best position to get a loan at the best rate. Consider your options carefully and understand the nuances before signing on the dotted line.

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