What is a Car Loan?
A decade ago buying a car was considered as a luxury. But, today affording a car is possible in spite of the increase in the astronomical cost of the vehicle.
The borrower can have a car by paying a certain amount as a down payment. The vehicle loan is mortgaged in favor of the lender until all the EMIs are not over. After paying all the EMI’s, the car loan buyer becomes the owner of that car. Before you choose any car, you need to research on below aspects of it:
Steps of Purchasing a Car
- 1. Set your budget.
- 2. Select few cars of our choice.
- 3. Do test drive.
- 4. Calculate the cost of acquiring the vehicle.
- 5. Decide on financing options – cash or loan.
- 6. Actual purchase & registration of the car.
Important Loan Parameters
- Loan Amount: The car loan eligibility is based on customer’s income, CIBIL score, type of employment engaged and other credit parameters.
- Interest Rates: The car loan interest rate range fall between 8-13%. On the basis of customer’s profile, the interest rate is decided by the lender.
- Tenure: is decided by the customer & banks mutually. The car loan EMI will be higher, if you opt for lower tenure.
- Processing Fee: Usually no upfront fees are taken. However, 1-2% processing fees of the final loan amount can be charged.
Car Loan Tips
- 1. Try to make a huge down payment.
- 2. Choose the shorter loan tenure that fits your pocket.
- 3. Keep emotions out of car purchasing decision & choose the car which is affordable.
- 4. Check the availability of the car at a dealership. Sometimes it happens that your chosen car is not available for months.
- 5. Know the difference between on road & off road price. A buyer is supposed to pay registration, insurance & hypothecation charges additionally.
- 6. Compare processing fee and other fees of all lenders.
- 7. Before signing read loan application, loan agreement & other documents carefully.
- One Identity Proof (PAN Card, Driving License etc).
- Residence Proof (Electricity Bill, Water Bill etc).
- Income Proof (Salary Slip, Income Tax Returns etc).
- Updated Bank Statement/ Bank Passbook.
(Note: The lender can ask for more documents based on the profile of the customer).
Availing a car loan is more than just negotiating the sticker price. Understanding your personal credit history and the variety of financing options are key factors, as well.
We hope that this article will help all potential car loan customers. If you still have any query left, then you can get a free consultation at CapitaWorld.