Planning to roll with a new set of wheels Whether it’s your first car or an upgrade, most of us finance our car through a bank loan. And while bank loans are easily available these days with much less hassle than in the days of yore, there are quite a few things you should be aware of before finalizing your bank of choice. Here in this piece we will share some tips to help you select the right car loan for you. Let’s get going
Find the best interest rate
This is the most important part of the process, as it broadly defines how much money you are going to end up paying over the principal amount you borrow. Increase your knowledge on flat and floating types of interest rate. The former doesn’t change through the tenure of the loan, but the latter may change, leading to an increase or decrease in your EMI or tenure. Make sure you are going for the lowest interest rate, after making a thorough comparison.
Make a comparison
Don’t go with the loan offered by your car dealer at once. Typically, car dealers have their commission knitted into the deal they are offering, making it a bit more expensive than the standard rate. Call up various banks for the rates and services offered before you make a decision. There are quite a few online loan comparison portals available these days. Make use of them before taking the final call.
Choose the loan tenure wisely
You loan repayment tenure should be a perfect blend between the affordability of the EMI and quick closure. While it may appear very tempting to extend the loan tenure as the EMI reflected makes it look way more affordable, if you add up the extra money you’d end up paying over the longer tenure, you’d be shocked to see the numbers. Make a sensible decision and choose the right balance between affordability and early loan closure.
Know your EMI
Talking of EMIs, make sure that you have done your calculation on the EMIs thoroughly. Quite a few financial institutions offer you the feature of online car loan EMI calculator. Use one to your advantage.
Ask about additional charges like processing fees
Typically, banks charge a nominal processing fee. This fee varies from bank to bank and sometimes the difference in the processing fees is quite substantial. Make sure that you compare these fees and make a decision only after factoring it in.
Hunt for special offers and schemes
If you’re lucky, some bank might be celebrating its 25th anniversary and offering car loan at special rates. There might be a festive deal, a scheme sponsored by a car manufacturer or something else of that sort. Keep an eye for such special deals before making the final decision, as you may actually end up with a bargain you may have never dreamed of.
Foreclosure Penalty Clause
While signing up for a loan, ensure that you have read and fully understood the terms of foreclosure. Foreclosure is another term for early repayment of loan by the borrower. Different banks have different terms for foreclosure, where some banks don’t even charge any penalty for foreclosure. Ensure that you know of and agree to the foreclosure terms before choosing a loan.
Use these tips as a checklist before you go in for your car loan and you will end up with a deal which not only saves you some money, but also turns out more convenient and hassle free.