Purchasing a car may seem like an easy feat as driving one, but on the contrary, there is a lot more to be done. Not only will you be required to provide paperwork, but you will also need to be on top of it to secure the high-ticket purchase. So how do you know when to wait, or go for the big purchase?
A car loan is one way you can go about purchasing your car. However, your lender will ensure that you do not cross 45% of your monthly income as payment. This would also include the other monthly liabilities. While this may seem like a small amount, in reality, it is quite big. As compared to other savings such as your monthly obligations, excluding childcare, college savings, and other savings in general, this is a large expenditure to take care of.
So if you find you’re unable to make those ends meet, chances are you may not be ready to buy a car. Given below are some means to keep your loan payments as manageable as possible:
Pay off previous debts: The first step you need to take is to pay off previous debts. You need to check if you have a workable down payment. If you have any debt payments that push your debt over the 45% mark, try to pay them off. Focus on the debts that have the greatest balance. In doing so, not only will it allow you to apply for car loan that is large, but most importantly it will allow you to afford a new mortgage payment.
Keep your monthly debts in check:Whatever current monthly debts you have, it will limit your purchasing power especially if you want to apply for car loan. Therefore, it is crucial that you reduce these debts on a monthly basis. You can make a repayment plan that focuses on repaying each debt within the given tenure. Alternatively, you can focus on repaying each debt one at a time. Once your overall debt to income ratio has increased, you can apply for the loan to purchase a car.
Avoid focusing on high-interest debts:It is not what you owe, but rather what you pay that counts. Lenders look at certain factors when it comes to your application for a car loan. Most lenders focus on the minimum payment that you’re obligated to make on credit payments of whatever interest rate you have. In other words, your 0% home loan can adversely affect your ability to borrow, especially if that payment is a few thousand rupees a month.
All you need to remember is that only you will be making the payment for the loan. So purchase a car if it only makes financial sense for you. While low rates are an attractive reason to purchase a car, you need to exercise financial prudence.