Since buying a car is a huge milestone, it is important that you make an informed decision about the purchase by evaluating all the car loan options available. We have collated a list of all the essential elements you need to consider before applying for a car loan
All the banks offer a fixed interest rate which can be anywhere between 10%-18% depending on the bank’s policies. However, the car loan interest rates also differ based on the tenure and amount of loan.
For the loan application, an ID proof, age proof, address proof and passport size photographs are mandatory. Voter ID card, passport and driving license can qualify as valid documents for these requirements. An earning proof is also required for the loan applicant. For employees, salary slips of the last quarter can be a valid earning proof whereas for business personnel, their income tax return is considered valid.
While the documentation above establishes that you can qualify for the car loan, your credibility with the bank can be established by improving your credit score. If you have a good credit score with the bank, you can also get a lower car loan interest rate from the bank. Maintaining a good credit score with the bank is advisable, since a poor score can cause rejection of your car loan.
Most banks charge processing fees and charges ranging between 0%-2%. However, several banks also have zero processing fees for the car loan. Along with that, there are also pre-closure penalty charges associated with early payment of the loans, but this is also completely dependent on the bank. Some banks have entirely removed the process of charging penalty for early loan repayment.
Availing a loan with up to 90% of the car value is common amongst most loans offered, however, with some more research on the available schemes, you can also avail up to 100% of financing for the loan. Car loans are available for a tenure from anywhere between 1-5 years. However, the longer the tenure, the more is the final payment on the car as interest payable would be higher. Hence, if you want to decrease the overall interest payable, it is advisable to choose shorter loan duration and higher EMIs. Now that you are clear on all the aspects you need to consider before applying for a car loan, ensure that you select only the best value loan with affordable interest rates.
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