Thinking about getting a car? Surely you’re excited and nervous! Buying a car is a big step, and if finances are a concern, a car loan can come to your rescue. But before you dive in, there are a few things you need to know. In this article, we’ll walk through all the essentials of taking a car loan. From understanding the types of car loans available to knowing the factors that influence your eligibility, we’ll cover it all. So, buckle up and let’s hit the road!
Understanding Car Loans
First things first, let’s talk about the different types of car loans you can consider. You can opt for either a new car loan or a used car loan, depending on your preference. The former is meant for purchasing brand-new vehicles. The rate of interest starts from around 7.25% and a tenure of around 7 years. On the other hand, used car loans – as the name suggests – come in handy when you’re eyeing a pre-owned gem. The interest rate starts from approximately 10% and has a tenure of around 5 years.
Factors Affecting Your Car Loan Eligibility
Credit Score
Lenders want to make sure you’re a responsible borrower who can repay the loan on time. To assess your eligibility, they’ll look at your credit score. It’s a numerical representation that shows lenders your creditworthiness. Ideally, it’s best to have a credit score above 750 to avail of a car loan. Remember, a healthy credit score can open doors to better loan terms and interest rates.
Interest Rates
Car loan interest rates can vary from lender to lender, so it’s essential to compare offers. Look out for any additional charges like processing fees, documentation charges, or prepayment penalties. All of these charges can really add up, so understanding the total cost of the loan will help you plan your finances better.
Harsh Roongta, a noted investment advisor, recommends asking for a cash discount on the down payment instead of a lower rate of interest. You can then compare the cash discount offered by different lenders to grab the best deal.
Applying For The Car Loan
Once you’ve narrowed down your options and found a suitable car loan, it’s time to apply! Most lenders offer both online and offline application processes. Online applications are convenient and save time, allowing you to fill out forms and submit documents from the comfort of your home. Offline applications, on the other hand, involve visiting the lender’s branch and completing the necessary paperwork. No matter which approach you choose, ensure that you have all the required documents such as identity proof, address proof, income documents, etc in handy.
When choosing a digital lender, Abhay Bhutada, Poonawalla Fincorp’s MD, advises that you must check the background of the lender before finalizing them. You can do this by checking if the lender is registered with the Reserve Bank of India. Also, the comments and ratings on the lender’s app/website can reflect their efficiency or legitimacy.
Finalizing The Loan
After submitting your application, the lender will review your documents and assess your eligibility. If you’re approved, they’ll provide you with a loan offer detailing the loan amount, interest rate, tenure, and monthly installments. Don’t rush into it; carefully review the offer, understand the terms and conditions, and clarify any doubts with the lender. Once you’re satisfied, it’s time to seal the deal and get closer to driving your dream car!
Remember, taking on a car loan is a financial commitment, so it’s crucial to manage your finances wisely. Make sure the monthly installments fit comfortably within your budget, leaving room for other essential expenses.
