Everybody prefers to finance their vehicle through bank loans, instead of having to pay the entire amount by cash. This helps to cut down the financial burden and allocate it in couple of years. But by doing so you are also required to pay interest to the banks for the loan amount sanctioned to you.
Nowadays it’s not difficult to get loans for your vehicle or for any other personal need. There are a number of banks offering loans to its customers. But the point is you have to be aware of the charges and interest rates. You can be easily fooled with their marketing strategies and the offers or deals that accompany the loans.
Here are some of the top questions you should ask your bank before opting your car loan
In this article…
How much down payment do I need to make?
Most banks allow 80%- 90% loans for showroom price of your car. The rest of the amount would have to be paid by you. The larger the down payment the lower will be your loan amount. Paying a huge amount may be a little difficult as it puts a strain on your personal savings. But it would be wise to pay a larger amount in the beginning as it would be beneficial in the long run.
What are the documents required and what is the processing time?
For your car loan you need to submit identity proof, address proof and income proof along with your application. Once these have been submitted your loan would be sanctioned within a week’s time.
What is the interest rate you will be paying?
The interest of the car loan is very important since you will be paying this every month .You have to make sure that it is well within your budget. You might like a vehicle but if it’s above the budget then it will become difficult to pay off the loans. The salesmen of the banks may make you feel that it is possible to pay off the loan but it’s important that you don’t fall for such gimmicks.
What are the types of interest available for payment?
For car loans you can opt either fixed or flexible interest rates. Under fixed you would be paying a fixed EMI every month and this would a safer option. The floating rate varies according to the state of the economy.
What is tenure of the car loan?
Tenure is time within which you can pay off your loan. Banks normally offer 1-5 years tenure and in some exceptional cases offer 7 years too. It’s always better to opt for smaller tenure as the loan gets paid off quickly. But if you wish to lower your EMI then you would have to opt for longer tenure but again you would be paying higher amounts as interest.
What are the other options for car loans?
Once you have spoken to your dealer you can also check with the other banks and other lending institutions of the possible deals. You need to weigh your options and find the alternates available. This gives you a better knowledge of what is available and puts you in a better position to bargain.
What are the extra charges to be paid?
Apart from the interest rates you also have to pay the documentation fee and processing fee for your car loans. Some banks charge a very nominal amount while some don’t charge at all. Most of the private banks charge heavily as processing fee which might vary depending on the loan amount. So in the way of getting loan easily you may end up paying a good amount as fees. It’s important to find these costs and compare with other banks too.
What is the EMI date?
EMI date is often fixed by the bank but it must be time when you are comfortable in making your payments. Check with the bank and set a right date for the EMI.
Does the car loan have any prepayment penalty?
It’s important that your loan does not have any prepayment penalty. Loans should be flexible and must allow you to pay off the loan entirely or a partial payment whenever possible. Some banks charge a fee for such payments. So make sure that you don’t have to bear such a cost.
Does your car loan come with an insurance?
Some banks offers free car insurance along with their loan. So if it is available it could be an additional advantage.
So, there you go. Before you take a car loan, make sure you ask your bank these questions and make the best decision.
Here are the best car loans in India today, and here are the best car loan rates. Also, read my tips on how to get the best car loan rates.