With proper financing, your dream car can soon become yours

Friday 19 April 2013, 10:25 AM by

India is one of the largest emerging automobile markets in the world and is growing at a rapid rate every year in terms of sales and revenue. Interestingly, around 80 per cent of domestic car buyers opt to finance their vehicle, which has led to an increase in demand for auto finance in the country. With a number of banks pitching lucrative and easy to avail car loans to customers, it has become very convenient to finance any car in recent times. However, still there are certain key points to bear in mind before applying for a car loan.

Since, there are a number of banks available in the market offering car loans; it becomes mandatory for the customer to research well before zeroing down on a particular bank. The most vital point to consider is the interest rate to be charged by the bank on the loan availed. With a number of choices, customer should research well before availing a loan and select the one that charges lower interest than others. It must be noted that the bank in which the customer holds an account may provide a little discount for being an existing customer.

The next thing on the memorandum is the down payment that the customer needs to pay up front. It is a percentage of the original price of the car that the loan seeker is required to pay upfront as security. Banks demand a down payment varying in a large range, however, a lower down payment may result in heavy EMI to be paid every month. Next comes various charges levied by banks like processing fee on the loan amount, late payment fees and foreclosure charges. These are different for different banks, so a complete research is recommended to get the best deal. It is also required to have a clean credit history to generate confidence, and if there are some dues pending on your part, it is recommended to have a third party guarantor as bank may ask for it.

Often it happens that car dealers in the market tie-up with financiers to offer car loans as well, on a commission basis. Such loans are convenient as they are pre-approved and may also have a lower EMI. However, it may not be the best deal in the market and it is important to evaluate the loan offered by the dealer against other car loans available. Dealers also provide insurance along with the car, which are convenient to avail. It is important to go through the entire policy and in case the policy is overpriced or has non-beneficial terms, it is always advised to opt for a different one.

Since car loans are immune or prone to a lower rebate on tax and also comes with higher foreclosure charges, it is advisable to make the most of the loan. Customers should analyse their current investments and try to finance the car partially with an asset that is not performing as it should. This will help in reducing the total loan amount and help in easier financing. Keeping all these points in mind, car financing becomes a profitable and satisfying experience.

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