The automobile market is on the boom since the past decade in India. The number of people who buy cars these days have outgrown every past record. Not only the development of infrastructure has motivated people to buy cars but also the ease with which we get car loans today has enabled people to buy cars and pay back the loan amount subsequently. However, every company that provides car loans does not suit every buyer. The rate of interest, tenure, prepayment charges and other aspects are prime movers that help people decide the type of loan they want to take to ride back home in their favourite car.
The interest rate on car loans differs from person to person. If we follow some of the best practices, we can end up paying far less on car loans on maturity.
YOUR CREDIT SCORE- Your credit score matters a lot when it comes to calculating the interest rate for your car loan by the bank. The bank analyses your financial history thoroughly and it accordingly decides your creditworthiness, based on which they offer you the interest rate for your car loan. People with a higher credit score get loans at relatively lower interest rates. So it is advisable that if you are planning to take a car loan in near future, start to repair your credit score by following the best practices.
PRICE OF THE CAR- Lower the price of the car, lower would be the loan amount and in turn the bank would impose relatively lower rate of interest on your loan amount. Every dealer has a huge margin on cars. Try to get the best deal possible. You can try various showrooms in the vicinity and enquire about the price of the model you want to purchase. Also, you can try to negotiate the freebies that the dealer can provide you in case every dealer offers the same price.
KEEP THE LOAN TENURE AS LESS AS POSSIBLE- Even if you have a huge loan to repay, try to keep the loan tenure as less as possible. In that instance, you will end up saving a huge amount of interest money which would otherwise be needed to pay off your car loan. Also, lower tenure allows the bank to reduce your interest rate further. The average loan repayment period is around 67 months for a car loan. Try to fix your loan tenure to around 50 months if it does not eat-up your finances and affect your daily budget.
AVOID UNNECESSARY ACCESSORIES- Every dealership offers a set of accessories with every model. Sometimes they may be necessary whereas sometimes they may not be so useful for you. Dealers charge a standard amount for these accessories. If tired in the automobile market, the buyer can get his vehicle customised as per his needs at lower prices and according to his needs. Paying for a high-end music system when you are not such a music freak makes no sense.
CHOOSE YOUR CURRENT BANK FOR LOANS- Your current bank knows very well how efficiently you have managed your finances in the past and how well have you repaid your loans on time. Moreover, as you are a loyal customer, they will provide you the car loan at much lower interest rate. Generally, people opt for loans from banks with which the dealer has tie-ups. Most dealers discourage people from taking loans from other banks. The bank having tie-up with the dealer has relatively higher rate of interest. Refrain from taking loans from them and reach out to the bank that offers you the best deal.
