Things You Should Consider Before Applying for a Car Loan

Thinking about buying a car but you don’t have the funds? Or are you simply looking to exchange your old banger for a slightly shinier one? With the many cars for sale online, it has become easy to get yourself some new wheels and almost as easy to make rookie car loan mistakes!

Applying for a Car Loan

Here are a few things you should consider before fill out an Auto Loan Application.

Credit history and eligibility of the loan applicant 

Banks generally look into an applicant’s previous credit history and fulfillment of the eligibility criteria before sanctioning the loan. 

Banks sanction or reject loan application on the basis of monthly income or salary  for salaried professionals, and annual income for business people.

With the number of bank loan defaulters increasing every day, banks nowadays have become very strict when it comes to sanctioning home or car loans. Banks investigate the CIBIL (Credit Information Bureau India Limited) report of the individuals to determine what credit track records the applicants have. While some banks have a universal loan processing charge for all individuals , others ask for it on the basis of the sum of debt and a fixed percent is used to compute the charge.

What’s The Real Price?

You may have found the perfect car with the perfect price tag but remember that this is not all you’ll be paying! Don’t forget to add up all the interest as well as service charges and VAT ( value added tax) and then you’ll get a better idea of the real price of your lovely car.

There are also loan processing fees charged by banks that can have an effect on the final cost of the car that you are looking to purchase. The computation of loan processing fee differs from one bank to another.

Calculate Your Budget

Your loan payments will give you the amount you’re going to need to fork out every 30 days for your car, but can you really afford to pay that each and every month of the year? Plan for holidays, celebrations you’ll be buying gifts for, and the cash you need for a rainy day and make sure you’re not dipping into those funds.

Consider the interest rates

The rate of interest for car loans in banks is something you need to find out because it will have a big impact in the final cost of the car. Check out the interest rates of different banks and ten make your decision cautiously.

Car loan usually has 10-10.5 per cent of interest per annum according to the   present macroeconomic scenario. Many banks provide fixed rate of interest throughout the loan term. For car loans, the floating rate of interest is the best because when the rate of interest decreases you can always reap its benefits.

EMI and loan tenure 

This is the most important thing to consider before applying for a car loan. The down payment varies from one bank to another and that will determine hoe much amount of money as car loan you will need. Your EMI is also influenced by factors such as loan value and loan term. Make sure your loan amount is small and the loan term is short because in that case, the rate of interest will be low.

A Little DIY

If the prospect of talking to a loan company or rolling up to your local car dealership seems daunting, don’t forget just how much of this you can do yourself online, if only to get an idea of what cars are on the market and which loan options are popular. There are many online loan calculators that can help you get an idea of what you’re facing, not to mention the great amount of used car classifieds available online.

Shop Around!

There are hundreds of companies out there ready to give you some money, but at what price? Research auto loan companies and remember that even a difference of 0.5% can make all the difference when you’re paying off that loan. Same goes for your car, there are plenty of second hand cars online and you can browse without the pressure of the car salesman’s magic words.

Insurance can be the key

Many lenders will often advise that you require insurance to acquire the best car loans. In case if anything happens to the lender during the loan tenure having an insurance might not be essential, but it might be beneficial to have the information of any insurance coverage you have accessible.

Whether you’re looking to find a used Ford Focus car online for sale or browsing auto loan companies, take your time, do your calculations and ask around! The beauty of starting this process from the comfort of your computer screen is that you can send a line or two to a friend for advice, and of course not feel pressured into signing anything before you’re figured out the best solution for you!