Buying a car is a major milestone in most of our adult lives. It is one of the things we aspire to own since childhood. Thanks to car loans and banking and non-banking organizations that fund them, it is now easy for everyone to purchase their dream car. Depending on your budget you can choose to purchase a new car on EMIs with or without making a down payment. If you too are waiting to purchase that dream car, here are a few tips that can help you save money on your loan.
Make a large down payment: It is always better to plan your finances before applying for any loan, especially for those that go in the tunes of a few lakhs. Relying on 100% finance can increase the overall size of your car loan interest rate. With a smaller loan, it is easier to pay it off faster and get lower rates of interest. Also, when you choose to make a larger down payment, you are giving your financier the added assurance that you will not default on your payments, thus increasing your chances of getting a loan on a low rate of interest.
Opt for shorter loan tenures: If you cannot make a decent down payment, a second effective way to get low interest rates is to opt for short tenured loans. Typically, banks and financiers give borrowers 7 years to repay the loan on vehicles. However, if you use a car loan EMI calculator, you will find that you end up spending a lot more with long duration loans. Try to opt for a short, 3-4 years loan instead of 7 years. By opting for a short duration loan, you save a lot of money in interest payments.
Don’t settle on the first lender: When you set out to look for a financier, make sure you do your research thoroughly. You will find a huge difference in the interest rate quoted by the bank, the financier companies and the car dealers. The best option is to go for a loan from the bank with which you have an ongoing relationship. Since the banks have an account of your business, they can offer loans on lower interest rates. Car dealers too have the discretion to offer you low rates, however they are known to charge you if you choose to pay off your loan earlier than your selected tenure.
Read the fine print: Financers often charge additional fees which include service tax, processing fees, GST, on-road price etc. Make sure you ask about the car loan rates and the additional, aforementioned costs before signing the documents. Most financiers claim to waive off or reduce processing fees during the festive seasons to attract customers. Ensure that this waiver is genuine and that you aren’t paying higher interest rates for the loss incurred by financers from reducing/waiving fees.
Make a large down payment: It is always better to plan your finances before applying for any loan, especially for those that go in the tunes of a few lakhs. Relying on 100% finance can increase the overall size of your car loan interest rate. With a smaller loan, it is easier to pay it off faster and get lower rates of interest. Also, when you choose to make a larger down payment, you are giving your financier the added assurance that you will not default on your payments, thus increasing your chances of getting a loan on a low rate of interest.
Opt for shorter loan tenures: If you cannot make a decent down payment, a second effective way to get low interest rates is to opt for short tenured loans. Typically, banks and financiers give borrowers 7 years to repay the loan on vehicles. However, if you use a car loan EMI calculator, you will find that you end up spending a lot more with long duration loans. Try to opt for a short, 3-4 years loan instead of 7 years. By opting for a short duration loan, you save a lot of money in interest payments.
Don’t settle on the first lender: When you set out to look for a financier, make sure you do your research thoroughly. You will find a huge difference in the interest rate quoted by the bank, the financier companies and the car dealers. The best option is to go for a loan from the bank with which you have an ongoing relationship. Since the banks have an account of your business, they can offer loans on lower interest rates. Car dealers too have the discretion to offer you low rates, however they are known to charge you if you choose to pay off your loan earlier than your selected tenure.
Read the fine print: Financers often charge additional fees which include service tax, processing fees, GST, on-road price etc. Make sure you ask about the car loan rates and the additional, aforementioned costs before signing the documents. Most financiers claim to waive off or reduce processing fees during the festive seasons to attract customers. Ensure that this waiver is genuine and that you aren’t paying higher interest rates for the loss incurred by financers from reducing/waiving fees.
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