Are you buying a brand new car? If yes then you must be very happy and excited. If you are buying a car on a bank loan, you need to take care of few important things. Loans are quite common for people buying cars. It is a fact that over 90% of people buy cars through car loans. Getting a car loan is easier today because there are many new banks in the market.
Also competition is getting intense between banks, so they are offering attractive interest rates with longer duration repayment facility for borrowers.
Here are ten things that to know before getting a car loan:
In this article...
Check the interest rates
The first and foremost thing that you need to do before actually getting a car loan is to compare the rates of interest of various banks or financial institutions. This is most important as there are no standard rates in the market. The rate of interest varies from floating to flat & it varies from bank to bank. Even a marginal difference of few points in the rate of interest could make a huge difference to the money you have to re-pay the bank.
Related:10 Best Car Loan Interest Rates in India
Check your credit score
Credit score these days has become one of the most important criteria in sanctioning loans. The credit score of a person defines his/her loan repayment ability. Thus, a low credit score would mean less loan amount or higher interest rates. Better check your credit score before applying for a car loan.
Complete your documents
Sometimes, getting a car loan is not that easy. All the banks and financial institutions follow the KYC (know your customer) norms for granting loans. They verify plenty of papers and your past credit record and you should have all the necessary documents with you. Some of the important documents are income proof, bank statement, valid address proof, photo id proof, income tax return statements of past years, NOC if in case you have recently cleared your last loan, your credit card statement and any more.
Related:10 Things To Know Before Getting A Car Loan
While applying for a car loan make sure to get quotation from all the dealers of the desired car. Every dealer ties up with a different bank, so they quote different rates and other charges. It is always better to visit all the dealers and get a quotation of their rates along with financial charges.
Select loan repayment period wisely
Loan repayment term is the most important part of a car loan. When you are taking a car loan make sure to consider the loan repayment period wisely. Do not get influenced by bank executives who will try to mould you so that they can get more incentives from their employer. You may think that 7 years EMI is good and as per your budget, but if you calculate your total repayment in 7 years you will shocked to know the figures. So, it is always advisable to choose the minimum loan repayment term and save lot of money.
Calculate your loan EMI
Most of the financial websites offer free EMI calculator. In order to plan your monthly EMI, don’t forget to calculate your EMI based on the given interest rate and decide which one is better for you.
Check processing fee
Most of the loan companies do grant auto loans at cheap rates, but charge huge amount of processing fees while allotting the loan amount. Various banks charge different processing fees and it is up to you to ask about any such fees, if payable.
Related: 20 Tips To Get The Best Deal When Buying New Car
Charging service tax is ok and you can’t question this, but what you can ask is how frequently you need to pay service tax. Most banks charge it as a one-time lump sum while some charge on a yearly basis.
When you are taking a loan from a bank never forget to ask the bank regarding foreclosure penalty. This is something which most of the buyers are unaware of. When you repay your loan amount in a lump sum well before the actual repayment period then a bank charge foreclosure penalty on the remaining loan amount. Various banks have different foreclosure rates, so select your bank wisely.
Look for schemes and offers
You will find many attractive offers and deals offered by various banks on car loans. If you have a sound profile then the bank could even offer you a customized deal. You could also get a 0% finance scheme on your loan amount.
Tip: Check Twitter and tweet about your car buying intentions. Sometimes, car companies will get back to you. I got a good discount via Twitter when I bought my SUV.
Overall, with the help of the above mentioned points you could get a better car loan without any hassles and enjoy riding your car without any worries. Make sure to complete all necessary loan formalities before proceeding with a loan.
Got questions? Ask in comments.
4 thoughts on “10 Things To Know Before Getting A Car Loan”
Hi, I am planning to buy a car (new) for the first time, need some advice on choosing financial institute/bank for the loan.
Income : salaried (non-govt)
Salary :37000pm,(35000 pm. take home sal)
Current city: Delhi (job/rental)
To be purchased in: Assam( permanent address)
Loan history :non
Credit card: icici(limit 35000)
Sbi (limit 90,000)
RBL (limit 36000)
Car :alto k10 Lxi optional
Please contact me if need more info, thanks in advance.
Hello… Sir.. I am taking a car loan from HDFC bank.. I am taking loan of 520000 for 5 years… Will I have to pay less amount with interest if I complete loan in 2 years.. And also guide me about the documents which I should take from bank while taking a loan.
Absolutely not. You should contact them immediately and get all your documents. Try contacting the branch you got the loan from.
I took a car loan recently from icici bank, 10 months ago exactly. till now i didnt get any loan agreement or any papers towards loan. is this normal business practice when it comes to car loan? please advice