“We don't pray for the love we just pray for cars”
Buying a car with the latest features or choosing a swanky one can at times be heavy on our pockets despite having it all planned. Car loans are like the catalyst for buying our dream car. However, not everyone spends enough time researching and comparing car financing schemes. If you are planning to buy a car that you have wished for then we have a list of things that should be on your checklist before you hop on to a decision or before you apply for a car loan, making things uncomplicated.
Choose your car wisely:
When you plan to take a car loan, make sure you choose your car wisely. A car that suits all your needs and requirements should be the deciding factors of the choice you make. Research about car category (Sedan/SUV/Hatchback) and fuel type (Petrol/Diesel/CNG). Choose the one which suits your budget as it is a big expenditure that might be affecting your finances for the upcoming months.
Credit History and Credit Score:
Your credit history and credit score are the deciding factors for your eligibility to get a car loan. Before you apply for a car loan, it is mandatory to make sure that one has a good credit history and fulfills all eligibility criteria. Banks approve or reject loan applications based on your entire financial standing, starting from your monthly salary to your ability to repay your debts to your credit activities.
So, the foremost step is to visit the website of an RBI-approved credit bureau in India like CRIF and check your credit-worthiness by downloading a free credit report. A higher score means a better chance of loan approval and lower will be the interest rates. One will have a greater probability of approval of the loan if he/she has a score above 700.
The Rate of Interest:
Different banks offer a different rate of interest and it is important to analyze and do a little research to get the best deal. Since the rate of interest can make a large difference in the final cost of the car you want to buy, make sure to choose a deal wisely and not just any prepackaged loan deal.
Down Payment:
Usually, 15% to 20% of the loan amount is the down payment amount that one must pay. Down payment works just like margin money for our loan needs. The higher the down payment is, the lower is the quantum of EMI one must pay every month.
Processing Fee:
Banks charge a minimum loan processing fee for all car loan requests. However, the final calculation of loan processing fee differs from bank to bank. While some banks have a flat loan processing fee, others fix the loan processing fee depending on the amount of loan and a fixed percentage is used to calculate the fee. While comparing the loan processing fee, it is imperative to check other charges like late payment charges in case of a missed EMI of various banks.
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Foreclosure Charges:
Banks charge an extra amount for prepayment of the car loan before the end of the loan tenure. Suppose you want to pay off your car loan in one go, you may have to shell out around 2 percent to 5 percent of the outstanding balance as foreclosure charges. Make a thorough check with various banks about the charges for foreclosing your car loan.
Package Deals:
Car dealers often have tie-ups with various banks offering pre-approved car loans at the car showroom. While pre-approved loans may look very alluring but are often costlier than independent car loans.
Bundled Insurance:
Banks offer clients the option of free insurance as an incentive to taking a car loan. As a borrower, you can also request the bank to offer you a bundled insurance plan to help you be stress-free about it in times of despair.
Buying a car and getting a car loan can be a little grueling but if you do it the right way it may not be as tough as it seems to be. Make sure you get yourself a credit check regularly with CRIF to ensure that you are eligible to apply for a car loan. CRIF provides you a free credit score, once every year.
