The automobile industry has started offering multiple cars models that suit the needs of every customer segment according to their affordability. Due to this, owning a car and going for long rides in a car with family and friends has become a symbol of success and an emotional goal. Considering the cost of purchasing a car in the current scenario, some financial assistance may be required to purchase a car. A great option for such financial need is availing a car loan.
Few years ago, availing a car loan was not an easy task owing to the branch visits, lender evaluation etc. But as the technology advanced, Availing a quick car loan has been made easier due to the simplified processes and options to research about the right lenders/banks. Although a car loan seems to be a good option for purchasing a car, there are several aspects that need to be carefully evaluated before applying for a car loan so that the loan can be efficiently managed at the later stages. Consider these five easy car loan tips to follow, to ease the loan application process and purchase your dream car.
- Avoid excessive borrowing
Applicants should understand their commitments/needs thoroughly before applying for loan and accordingly decide the loan amount to be applied for.
Often, the car dealers lure the customers with add-on features like music systems, parking sensors etc. Applicants then avail the loan amount including cost of such add-on features that are not immediately required. Higher loan amount, if availed beyond the basic and actual needs can later become a burden due to higher EMI amount that must be repaid. At a later stage, when the applicants have repaid certain part of loan, can include these add-on facilities to their cars if found to be necessary.
- Know the Documentation Requirements
The applicants have to ensure that they have all the necessary documents to be produced for verification before applying for the loan. The list of documents to be produced for verification can be found on the lender’s website or the loan officer at the bank/lender’s office can provide information about the documents required for verification. If all the necessary documents are not produced in required formats for verification, it could lead to rejection of the loan application and can affect the applicant’s plan to purchase the car.
- Evaluate and choose the right lender.
One of the key factors for availing a car loan is choosing the right lender to borrow the loan amount from. Various financial institutions now offer attractive interest rates for car loans. Karnataka Bank is one of such popular banks offering competitive interest rates with quick sanctioning of car loans.
While choosing a right lender, The first option is to always approach the lender/bank with whom the applicants already have an existing relationship. However, just because of existing relationship with the lender, deal cannot be finalized without evaluating other lenders/banks. Applicants can do an online/offline research and compare the interest rates levied by various lenders before choosing the right lender and apply loan accordingly with the lender offering the best of interest rates.
- Choose the right loan tenure
Car loans are usually offered for a tenure of 7 years (84 months) for the purchase of a new car. Choosing the right tenure is very crucial for the applicants. One needs to consider their financial health and also to manage the loan efficiently at a later stage. Longer tenure is suitable for borrowers finding it challenging to repay higher EMIs and help the applicants pay lower EMIs. But applicants have to pay more interest on the total loan amount if opted for longer tenure. The applicants comfortable paying higher EMIs can opt for a shorter tenure. Further, the interest rates offered to the applicants also vary based on the tenure chosen by the applicants. Therefore the applicants should carefully choose the right tenure for applying the car loan.
- Maintain a good credit score
The banks/lenders have a certain loan eligibility criteria that the applicant must fulfill in order to avail a car loan. The sanctioning of loan depends upon the applicant’s age, occupation, income and most importantly the credit score based on the previous repayment history. Good credit score indicates that the applicant is credit worthy with good repayment history and this helps in getting the loan approved quickly. Paying credit card bills or loan repayments on time are key factors to maintain a good credit score.
- Read the terms and conditions carefully
Banks/ other lenders levy a one-time processing fees for the processing the car loan application. Sometimes the lenders/banks can offer the loan at lower interest rates but charge higher processing fees. Therefore, The applicants should carefully read all the terms and conditions, charges like processing fees, down payment conditions, prepayment charges, late payment penalties etc levied and evaluate all the costs associated and include it in the total cost of the loan included. It can help the applicants manage the loan efficiently and make prompt repayments on time.
These are the 6 factors that applicants must consider before applying for a car loan to ensure a hassle-free loan processing experience. Although applying for a car loan seems to be an easy process, there are many important underlying factors that need to be carefully evaluated. With right lender, loan amount, interest rates one can purchase the car they have always wished for. The applicants also must not forget to make prompt and timely repayments after availing the car loan so that their credit score is well maintained, in case they want to upgrade to a better version of car by availing a top-up loan or choose to avail loan for any other purposes.