A car loan can be a lifesaver for a person who wishes to purchase a used or new car. Purchasing a car is not that easy because in most cases, people do not have a large amount of cash just sitting around to make a purchase like this. This is why more than 80% of new car owners prefer approaching a bank or lender to help them finance the purchase of their dream vehicle.
A mistake that’s repeated quite frequently is that more than half of the people who apply for car loan fail to do their research before they apply for it. There are a number of factors that play a role in the sanctioning of a car loan. A number of banks and lenders operating in the country claim to offer the best car loans at affordable interest rates. But it is up to the borrower to do their research to come to a conclusion on what they think is the right car loan for them.
With all these options, it becomes difficult to go to each and every bank and find out which car loan works best for them, meeting all of their needs and requirements. There are a number of financial websites such as BankBazaar which provide information on a number of leading banks that offer car loans. The official website of BankBazaar also provides a detailed breakup of a car loan with the help of the site’s Car Loan EMI Calculator. The EMI Calculator makes it easy for a borrower to understand their loans efficiently.
Here are a few things which you need to keep in mind when applying for a car loan with a lender or a bank:
- Loan Amount: The borrower will have to decide and make sure that they apply for a car loan which they can afford. It is not wise to apply for a car loan amount that exceeds the needs of the borrower. A larger loan means that the borrower will have to pay more as interest. Therefore, the right thing to do is apply for a car loan amount that is enough to purchase a dream vehicle.
- Eligibility Criteria: Banks will want to make sure that the borrower is more than capable of repaying a car loan amount that has been sanctioned to them. Most banks rely on the borrowers credit score to determine their reliability. Other factors that are considered are minimum annual income, loan amount, loan tenure, etc. Banks offer car loans for a maximum loan tenure of seven years while private lenders and car finance companies offer car loans for a maximum tenure of five years.
- Interest Rates: Interest rate that’s levied on a car loan plays an important role in deciding which bank to apply to for a car loan. Banks are not biased to a customer and offer the same interest rate to most customers. But there are factors which can help negotiate the interest rate on a car loan. Private lenders offer varied interest rates to their customers. Interest rate offered by private firms depends on a number of different factors such as tenure of the car loan, credit score of the borrower, risk profile of the borrower, etc.
- Loan Charges: It is important that the borrower does their best to find out about any charges that are levied on the car loan amount. These primarily include prepayment charges, processing fees, and late payment penalty. The processing fees which are levied on a car loan vary from one bank to another. Most banks in India like Bank of India, State bank of India, Bank of Baroda, Federal Bank, and Canara Bank offer car loans without charging a prepayment charge on the loan. But private banks like HDFC Bank, Axis Bank, and ICICI Bank imposes an extra charge on prepayments made towards a car loan. Both the bank and lender have different charges levied on a borrower who does not make their EMI payments on time. The car loan applicant can visit the nearest branch of the bank that they prefer or they can visit the official website of the bank to find out about these charges.
In summary, it is wise to ensure that a person applying for a car loan does their research to ensure that they pick the right bank that offers a car loan that meets all of their needs and requirements. It is a safer route to take and this also makes sure that the borrower has no problems in repaying the loan without making any major changes to his/her lifestyle.