Buying a car is a like a dream come true for many people. With the ease of getting car finance, it is very tempting to buy a more expensive car and service it with a car loan.
A car loan is a loan given by lenders to meet the cost of purchasing a car. The car can be a new car or a pre-owned car. The lenders usually hypothecate the car, which means the car is the security provided for the loan. Even though it is simple to apply for an auto loan, it is better to take this decision after due deliberations.
Here are 7 things you must know before getting a car loan:
1. Which cars do lenders give out car loans for:
Most lenders specify the cars they give loans for. Before applying, it is better to find out whether different lenders are giving loans for the car of your choice. It will save hassles while putting in an auto loan application if you know that the lender approves of the particular car model.
2. Which car would you like to buy:
Choosing a car is not an easy decision. Would you like to buy a hatchback or a sedan? Or put in extra funds and buy a utility vehicle? What is the final use for the car? Once the car is decided, there are different variants and models, which need to be decided. Knowing this will help while applying for car finance.
3. Interest rate:
The most important factor that has to be considered in a car loan is the rate of interest on the loan. Depending on the interest rate, the lender can be picked.
4. Whether you have the capability to repay the loan:
It is important to consider whether you have the finances to repay a car loan. If you are already paying a few EMIs, you should wait till you apply for a car loan. Having adequate income and income certainty is also a factor.
5. Whether buying a new car is beneficial or a pre-owned car:
This is one consideration. There is a huge market for pre-owned cars in India. If you want to buy a car but don’t have a large budget, you can consider purchasing a pre-owned car. Banks give car finance for pre-owned cars as well.
6. Other charges on the loan:
Along with interest, there are other charges such as loan processing fees, pre-payment fees. Before applying for auto loan, you should check and compare these rates from different lenders.
7. Down payment on purchase:
Most car dealerships have down payment facility. This reduces the loan amount and the interest repayments.