Majority of buyers, around the world, apply for a car loan while purchasing a new or used car. In fact, getting a loan for cars has become a lot easier than it used to be a decade ago. There are various government and private banks, car financing firms and auto-dealers that provide loans on attractive interest rates and longer repayment facilities. Therefore, being a buyer, it is important to understand all the important car loan factors before finalizing a bank or a finance company.
Interest rate
The Interest rate can make a big difference to your EMIs and monthly budget. So, it’s advised to check the interest rate being charged by the banks. Usually, interest rates depend on the amount, type and term of the loan. Just so you know, private banks, usually, charge higher interest rates compared to the public sector or government banks in India.
Credit history
Banks, these days, keep a check on the credit score of borrowers before approving their loan documents. Make sure that you have a good credit history or report. If you have a good credit history, it will be a lot easier to get car finance in India.
Eligibility factor
Banks approve the loan only when a borrower meets all the criteria set by them. The eligibility for car loan may vary in public and private firms.
Down payment
Down payment is the margin amount paid by the borrower, while purchasing the car. A lower down payment might be easy on your pocket, but it results higher EMIs and longer loan term.
Third person guarantee
Most banks demand for a third party guarantee for the car loans. However, some car financing firms may not ask for a guarantor, if you have a clean credit history.
Processing fees
Car financing firms and banks might charge a loan processing fee, either as a flat fee or on a percentage basis. If you delay your EMI payment, banks might charge late payment fees, which is usually 2 % per month on a higher loan amount.
Beware of packages
Many dealers try to sell additional accessories with a car, and add the total amount, car’s cost + accessories’ prices, in the loan. So make sure that the dealer doesn’t add things in your car loan that you may not even use.
Check on the insurance
Generally, car dealers also include insurance with the loan. So, ask for a different insurance cover if you find the offered one non-beneficial or costly.
