Check these things before taking a car loan. (Representative image/IANS)
Many people take a loan for the purpose of owning a car and the process involves some steps before the loan is approved.
More Indians preferred getting their cars financed in 2022 even as the average budget increased by 30%.
The India Mileage report 2022 report by CARS24 shared that more millennials shopped for cars in 2022, majority buyers are under 35 years. This trend highlights that young customers are driving the sector and options of car finance in the form of EMI have seen a wider acceptance.
At the same time, people are willing to spend a higher amount on cars without compromising on their choices, safety or quality.
Many people take a loan for the purpose of owning a car and the process involves some steps before the loan is approved. There are a few important things which need to be looked at carefully before applying for a loan for buying a car/vehicle.
Also Read: EMI for 6 Years A Preferred Choice for Salaried Car Buyers: Report
The CARS24 report added that the average EMI amount in 2022 was Rs 11500 and the majority of loans were taken by salaried professionals.
Things to check before taking a car loan
There is a common consumer behaviour to check carefully each and every item bought from the market whether online or offline. This also becomes crucial when you are seeking money in the form of a loan. Just thinking that the lender is financing you, doesn’t mean you don’t have the options to go through in details before finalising the agreement.
5 things to keep in mind while taking car loan
Loan amount: The first thing you need to consider is the amount needed as a loan to buy a car. Lesser the amount, lesser will be the tenure and EMIs, provided your affordability is not impacted.
Interest rate: Compare the rate of interest across all types of lenders so that you get a deal that fulfils your requirement and you have to pay less interest.
EMI: This is extremely important as you also have to manage other day-to-day expenses. Fixing an EMI by balancing other needs should be a well-thought task before finalising the loan application.
Loan tenure: When you assess the loan amount, you must consider the loan tenure as well. Lower EMIs may see less money being deducted per month, but in the long run, you end up paying more interest. So, less the tenure of the loan is preferred by many.
Also Read: Buying A House With Loan? Things To Consider Before Taking Home Loan
Type of interest– Fixed, floating or a mixed rate for car loan. In a fixed rate loan, the interest rate is fixed at the time of taking the loan. On the other hand, floating rate or adjustable rates are linked to the lender’s benchmark rate, which, in turn, moves in sync with the market interest rate and RBI.
Other things to check
Prepayment: Consider the charges, caps and other limitations. Read the documents carefully to understand the charges and the options of prepayment/foreclosure of your car loan.
Processing fee: Check whether the loan application has any processing fee or not.
CIBIL Score– Banks and other lenders check your CIBIL Score before approving your loan. Lenders will consider your credit score while approving your car loan application.
Documents: Check what types of documents the lender is asking. Make sure you keep them ready for seamless processing of your loan application.
Even after completing the repayment/closing of your car loan, do not forget to take a detailed loan closure statement, no objection certificate and repayment statement.
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