In the recent years, owning a car has become easy thanks to the increased purchasing power of the general public along with facilities for loans. In just a matter of minutes, a bank can approve your car loan. But before you finalize a car model, and visit the dealer, you must spend some time analysing figures and asking the right questions. A little research can help you determine what exactly you would be paying for the car. Here are five important questions to ponder on before you bring that dream car home.
What interest rate will I be charged?
The first thing you need to get acquainted with is the interest rate charged by your bank for the loan. Several banks like Axis Bank, HDFC bank, ICICI bank and others, offer car loans at low rates of interest. If you already have an existing relationship with the bank; that is you have an account with the bank and/or have paid off any other loans taken in the past, you can avail a loan at a relatively lower rate of interest. Ideally, you can get a loan for cars for anywhere from 8.5% to 12.5% per annum.
How much amount will my bank finance?
The smart thing to do is to pay 20% of the total price of the car as down payment and get a loan for the remaining 80% amount from the bank. Several banks also offer 100% finance but following the 20% rule helps reduce the loan amount, while you can fall back on 20% of your income easily to pay the EMIs. High monthly EMIs can strain your finances.
What will be the final price I must pay for the car?
While you can procure an auto loan for a low rate of interest, you may end up paying heavy fees for processing, documentation, foreclosure, default payments, later charges and even pre-payment, thus increasing the final price you pay for the car. You must check all aspects of the final amount including principal loan amount and tenure in order to get the lowest rate of interest.
What is the ideal tenure of the loan and how much should my EMIs be?
The first thing you need to understand is that such loans last longer, which I why you must have a regular source of income to pay the EMIs. Planning your finances smartly is essential. Try avoiding higher amounts of EMIs, just to procure low interest rates. Also try and avoid opting for the longest tenure because it only increases the interest payable on the actual loan amount. Instead choose a balanced EMI with a sensible tenure.
What fees are included in my loan?
Besides the interest, you must pay several fees against your car loan, which you should get clarity on while getting your loan sanctioned and while paying the debt off. You will ideally pay for documentation, credit reports, registration certificate, stamp duty, part pre-payment and several other charges. Comparing additional fees and charges of different banks is important before choosing the lender.
What interest rate will I be charged?
The first thing you need to get acquainted with is the interest rate charged by your bank for the loan. Several banks like Axis Bank, HDFC bank, ICICI bank and others, offer car loans at low rates of interest. If you already have an existing relationship with the bank; that is you have an account with the bank and/or have paid off any other loans taken in the past, you can avail a loan at a relatively lower rate of interest. Ideally, you can get a loan for cars for anywhere from 8.5% to 12.5% per annum.
How much amount will my bank finance?
The smart thing to do is to pay 20% of the total price of the car as down payment and get a loan for the remaining 80% amount from the bank. Several banks also offer 100% finance but following the 20% rule helps reduce the loan amount, while you can fall back on 20% of your income easily to pay the EMIs. High monthly EMIs can strain your finances.
What will be the final price I must pay for the car?
While you can procure an auto loan for a low rate of interest, you may end up paying heavy fees for processing, documentation, foreclosure, default payments, later charges and even pre-payment, thus increasing the final price you pay for the car. You must check all aspects of the final amount including principal loan amount and tenure in order to get the lowest rate of interest.
What is the ideal tenure of the loan and how much should my EMIs be?
The first thing you need to understand is that such loans last longer, which I why you must have a regular source of income to pay the EMIs. Planning your finances smartly is essential. Try avoiding higher amounts of EMIs, just to procure low interest rates. Also try and avoid opting for the longest tenure because it only increases the interest payable on the actual loan amount. Instead choose a balanced EMI with a sensible tenure.
What fees are included in my loan?
Besides the interest, you must pay several fees against your car loan, which you should get clarity on while getting your loan sanctioned and while paying the debt off. You will ideally pay for documentation, credit reports, registration certificate, stamp duty, part pre-payment and several other charges. Comparing additional fees and charges of different banks is important before choosing the lender.
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