Car Loan: People shop fiercely during the festive season. During this, different types of shopping offers are in front of the customers, due to which they like to shop during this time. Especially people like to buy cars only during the festive season. Banks offer cheap car loans to the customers. If your intention is to take a loan to buy a car, then know that some things should be kept in mind while taking a car loan. Know what those things are:-
credit report
- Banks will definitely check your credit report if you have applied for a car loan.
- Banks usually fix interest rates on the basis of credit score.
- With a credit score of 750 or more, there is a possibility of getting a loan at a lower interest rate.
- If the credit score is less than 750 then it can be difficult to get cheap loan.
- Credit reports can be obtained from online lending marketplaces or from credit bureaus.
Compare interest rates of different banks
- Do not decide to take a car loan just by looking at the offers of any one bank.
- To attract more customers during the festive season, many lenders offer special discounts on car loan interest rates for a limited period to new/or existing customers.
- It is important to check the specific car loan offers of banks properly. Apply for the loan only after studying the offers of various banks.
LTV Ratio
- The LTV ratio must be considered while taking a car loan.
- The LTV ratio of the car loan is the ratio of the cost of the car financed by the lender. The remaining amount has to be paid by the borrower himself as down payment.
- The LTV ratio may vary from bank to bank depending on the borrower’s risk appetite and credit profile.
- One should try to pay more down payment as it reduces the interest cost.
- Making a higher down payment can also help in getting a better deal and loan at a lower interest rate.
- Keep in mind that your financial planning should not get disturbed due to high down payment. Otherwise, you may have to face trouble later.
how much EMI
- If you have sufficient balance, then one should opt for the lowest repayment tenure to reduce the overall interest cost.
- If you feel that you do not have enough money, then you should opt for a longer tenure to reduce your EMI burden.
processing fee
- Typically, the processing charge for a car loan can be up to 2% of the loan amount.
- Many lenders either reduce or waive off the processing fee of car loans during the festive season.
- Make sure to check the processing fee while taking a car loan.
- It should also be checked whether the lender is charging any higher fee or interest rate to compensate for the reduction or exemption in processing fee.
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