Five things you should know before you choose a car loan

CreditVidya

You are tired of your old Car and ready to upgrade to a newer, more reliable model. Before you apply for that Car loan, here are five things you should do to ensure that you secure the best possible loan by careful assessment of your auto loan financing options.

Often people are in a hurry while buying a car. The excitement to drive your new is no doubt exhilarating, but before you actually buy a car it is important to understand the terms and conditions of an auto loan.

Also See: Best banks for car loans

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Best Banks for Car Loans

1) Down payment: a leading public sector bank is offering 85 per cent of on road cost of a car. A lot of banks offer 100 per cent ex-showroom cost of the car. If you are a privileged customer of a bank, you may even get a 100 per cent on-road cost of the car. But at creditvidya.com, we always advice people to maximum down payment so that the dependency on loan is reduced. Also, it reduces the interest that you pay proportionately.

2) Interest rates: The current rate of interest on auto loan is around 10-10.5 per cent per annum. Many banks have fixed rate of interest through the loan tenure. It is always better to choose floating rate of interest so that if the interest rate goes down, you stand to benefit from it. It is anyways important to consider macroeconomic scenario before you for floating or fixed rate of interest.

3) Your Cibil Score: You really don’t need any surprises when you go for that car loan so it is imperative that you clear up old debts that could harm your car loan application. You should first get your Cibil report and review carefully, data at Cibil indicates that 90% of loan approved are for credit score of 700 plus in the year 2011. If you have no credit (no loans, credit card) it would be a good idea to establish some credit before applying for the loan.

Also See: How to buy used car

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How to buy used cars

4) Foreclosure charges: When you are taking an auto loan, consider the kind of foreclosure charges you may have to bear. Many public sector banks have banned foreclosure penalties.

5) EMI and loan tenure: Before you chose the car you want, see how much funds you have for down payment and how much loan you may need. Your EMI is dependent on your loan value and loan tenure. Try to keep your loan and tenure short. That way you will be paying much lesser interest.

 

 

 

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