Applying for car loan? 5 things you must know before taking car loan

Lenders offer loans for both new and pre-owned cars, therefore the interest rates offered for them are also different. Here are five important things one should consider while taking car loan.

Car loan

car loan  |  Photo Credit: BCCL

New Delhi: Many people aspire their own car. You can drive off to your place instead of using crowded public transport. Earlier people had to shell out a huge amount of money buy their own car, but now one can take a car loan. It is helpful for the people who do not have enough money to buy it in one go.

Banks and non-banking financial companies (NBFCs) offer car loans with easy EMI (equated monthly installment) options. However, before taking a car loan, there are several factors one should keep in mind while taking the decision. For instance, along with the rate of interest, one should check the processing fee and prepayment charges as well.

Lenders offer loans for both new and pre-owned cars, therefore the interest rates offered for them are also different. The loan amount depends upon the applicant’s age and income. Apart from this, the loan amount being disbursed varies from one lender to another. It depends on the monthly salary and annual income. It may be noted that there are lenders who offer 80 to 90 per cent of the financing. In fact, some offer up to 100 per cent financing.

One should understand the different terms used while opting for a car loan such as Ex-showroom, On-road price. Ex-showroom price is the amount being paid by the customer to buy a car from a dealer. Whereas, when a customer pays registration charges, insurance premium, road tax, etc, to get the car, it becomes the On-road price. In fact, it is the actual cost that one pays to get the car keys in his or her hand.

While taking the loan, check how much EMI you can afford. You can calculate this by deducting your monthly expenses, other loans’ EMIs, insurance premium, SIP, etc. It may be noted that there are some lenders who offer lower interest rates to women.

The processing fee is charged when the loan application is processed. It may vary from one lender to another. It is important to read the fine print so as to understand the foreclosure charges, part payment and charges related to the prepayment of the loan.

Apart from this, lenders consider the applicant’s credit score while approving his or her loan application. Before you apply for a car loan, you can check your credit score and take the necessary steps to improve it. Based on the credit score, one may also get pre-approved car loan offers

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