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Make your car loan a joy ride

by Bhaskar Karkera (Head of Wheels, AU Small Finance Bank)
Apr 22, 2022
Make your car loan a joy ride, Knowledge, KonexioNetwork.com

Mumbai : Buying a car is a watershed moment in one’s life. Perhaps it is a decision in which the entire family participates, and the opinions of close family and friends are sought before making a final decision. One must not forget that even though car is an asset, but it is also a liability till the time the loan period is going on. Hence, one must not choose a loan in ad-hoc manner, but rather keep the following points in mind when opting for a loan.

Are you a Pre-Approved Customer? Being a healthy customer of a bank comes with certain advantages.  If you are a good customer of your existing bank, then chances are more that you may have a pre-approved car loan under your name. Availing of pre-approved car loans is usually easy and efficient with the least paperwork and time.

A healthy credit score = faster processing & approval

Maintaining a healthy Credit Score is of utmost importance; more so when you seek faster approvals and loan processing. Having a credit score greater than 750 helps you secure the best of terms and speaks well of your financial fitness. Your bank tends to trust you as a reliable borrower. It is noteworthy that one can enjoy better interest rate and/or a higher sanction of the loan amount, given higher credit score.

Right loan amount
For a car loan, remember that the average loan amount tends to be in the range of 75-85% of the car value. Although funding of up to 100% is available in the market, as a customer, you should try to keep the loan amount as per your specific need. This is crucial as higher funding would lead to higher EMI and interest paid over the period. The prudence of identifying the right loan amount can ensure your loan repayment is a pleasant experience.

Choose a loan that suits your needs-

Most customers tend to look at the interest rate and other charges only while considering a loan financer. Some other finer points must be considered too, such as customer service, loan processing time, a hassle-free process - all crucial factors that we tend to overlook. It is vital to remember that the key is getting a loan within a stipulated time. Evaluating the different rates is advised before you take a loan. Many websites offer easy EMI calculators. 

Do not limit your choices

You can avail of new car loans as well as loans for pre-owned cars. Just because everyone you know is buying a new car does not mean you do the same. If you want a particular car, but you are worried that a new car may burn a hole in your pocket, you can then look at pre-owned car options. The pre-owned car space is rapidly getting more organised with easy finance available at attractive rates. Further, point to note is that in pre-owned car, now-a-days, warranty is also provided by Organized Car Dealers which can further provide you comfort in owning the same.   

The devil lies in detail

What interest rate to pay and the tenure of the loan is key metrices to be assessed before committing to a car loan. While a tenure of up to 7 years is available in the market, one must only take a car loan for a period that one is comfortable with. Also, a crucial factor to note while determining EMI payment for a car loan is to check if other existing loan EMIs are manageable for you to service. As an informed customer, one should always check if the financier/lender is charging any foreclosure charges. There are multiple financiers who do not charge foreclosure after a specified period of the loan is completed.

It’s important that you buy your car from a dealer who has a healthy relationship with a bank that can offer you finance deals. Car dealers have different tie-ups with different lenders. Accurate and complete documentation must be ensured to have a hassle-free experience.

While availing of a car loan, make informed decisions. Scrutinize. You can bag a customized deal. Research thoroughly. Show up prepared so that you are in the best position to get a best-rate loan. Thoroughly review your options, understand the nuances before you sign on the dotted line.