Having a car has become a necessity nowadays, but not everyone can afford to buy a car right away.
In such cases, car loans are the best option; individuals can own a car by paying EMIs as per budget. There are many car loans available, but choosing a suitable option is essential.
Here are a few things to know before applying for car loans.
Compare and evaluate loan offerings of different banks
Those who are interested in taking a car loan must first compare different loan offerings of at least 3 or 4 banks or financial institutions before applying for one.
They should consider factors like the interest rate, interest type, and different fees charged by lenders on the loan provided among others.
Borrowers must always check and compare if better or cheaper loans are available.
Check which car models are financed by the bank
Before picking a bank for taking a car loan, one must also check whether the car model they are interested in buying can be financed by the chosen lender or not.
While many banks offer loans for almost all small and medium-sized cars, SUVs, and MUVs, it is always better to check the bank's list of cars that can be financed.
Find out how much the down payment is
Also, before finalizing car loan, one must also find out how much the down payment (margin) is. Many banks offer up to 100% of the ex-showroom cost of cars.
However, one must keep in mind that 100% financing means more debt and higher EMIs. One must pay as much amount as possible as the down payment because higher down payment means lower debt.
Know about the interest rate, interest type, repayment tenure
Borrowers need to do proper research and know how much interest will be charged by the bank on the car loan.
The interest is charged at a certain rate which can be either fixed or floating (variable according to the market fluctuations).
Applicants must also know how long the repayment tenure offered by the bank is and choose a tenure that suits them.
#5: Pay attention to additional charges levied by the bank
Lenders might levy various charges on car loans and borrowers should pay attention to how much they are required to pay. Some of these additional charges include processing fees, pre-closure charges or foreclosure penalty, part-payment charges, documentation fees, and overdue EMI fees among others.