4 Things to Consider Before Signing up for a Car Loan
Purchasing a dream car can become a reality by taking a car loan. However, there are certain factors that you should be aware of before zeroing on the right loan for buying your car. Keep reading to know more.
Whether you want to buy a new car or a pre-owned one, you'll be spoilt for choices. With so many car manufacturers producing hundreds of models, choosing the right car can be quite challenging. While selecting your favourite car may be the hard part, taking a car loan is surely not.
Thanks to digitisation and competition in the banking industry, today, you can get an auto loan quickly and at favourable terms. However, while it is easier today for prospective car buyers to sign up for a loan, certain factors should be considered before applying for the desired loan amount to get a great deal from your lender and also manage it efficiently.
Know Your Interest Rates
The interest rate on your loan can vary depending on factors such as car model, employer, credit score, loan tenure etc. So ask the bank for the offer and make sure you keep a close check on the interest rate offered. At times, you may be able to negotiate the interest rate based on your profile and by making a few changes to your loan application. For instance, adding a co-applicant might include your overall creditworthiness and make you eligible for a lower interest rate.
Know the Percentage of Loan Amount
ICICI Bank offers a car loan amount that covers 100 per cent of the car's market price depending upon the car loan eligibility criteria, the condition of the car, and other factors. While you may be eligible for a car loan up to 100% of its on-road price, it is advisable to make a sizeable down payment to lower your loan burden.
Fees and Charges
Banks levy a one-time car loan processing fee from the borrowers for processing their loan application. The processing fee amount can be based on percentages or slabs. Apart from this, make sure you check all the other charges and add them to the total cost of the loan. Instead of just looking at the interest rate on a loan, calculate the total cost of taking a loan, including interest and other charges, to evaluate if you have got the right offer from the bank.
Also, check the optional charges that you may incur during the tenure of the loan. These could include-
Late Payment Penalty
Charges on prepayment of a car loan
Know the Documentation Requirements
Make sure you have all the documents in order before you apply for the loan. You can easily find the list of documents on the website. Moreover, you can ask the loan officer for the same. If your documents are not in order, it could lead to rejection of your loan application, which can hurt your plans of buying a car and impact your credit score as well.
A car loan can significantly increase your purchasing power to help you procure the car of your choice. You only need to keep your eyes open and include the common but important factors discussed herein while doing your homework before signing on the dotted lines.
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