Moment you reach to a position where you can think of owning the car, you start mulling about taking loan from banks and other financial institutions to serve the purpose. But due to lack of guidance or ignorance, most of us get caught on the wrong foot. Either the car dealer takes advantage of your ignorance or you are not able to negotiate better with the bank on car loan. So we have listed out few suggestions that you can incorporate to prevent your pocket from getting pinched hard while taking car loan.
Down payment-Ensure you make down payment to the maximum extent possible so that EMI pressure and tenure of the loan get minimized. Shortening of EMIs will substantially cut down the interest outgo on the loan. Banks may tempt you by offering loan up to 100% of the road price of the car. But if you find your monetary resources strong enough, you can take a lesser amount of loan to buy the car.
Interest rate- The interest rate on car loan ranges around 9.5%-13.5 per annum on the new cars, while it goes up to 15%-20% on the used cars. Many banks follow the practice of keeping the fixed rate for the loan period. But it is always advisable to opt for the floating rate of interest as it will give you the benefit of lower interest rate when it comes down after the banks cut their respective lending rates in view of the RBI slashing repo rate, the rate at which the central bank lends money to commercial banks when they require funds to make up for the shortfall.
Keep an eye on Cibil Score-It is necessary you clear all your old debts as it could hamper your application for car loan. You must get your Cibil report and review it thoroughly. Make sure you achieve a good Cibil score as it will help you access hassle-free car loan.
Processing fee, foreclosure charges & late payment fee-Opt for the bank with less processing fee, foreclosure charges and late payment fee so as to reduce the overall cost on car loan.