Car finance is a crucial step towards buying a car. This
type of loan finances a large portion of the on road purchase price of the car.
Once you opt for a loan, you spend a significant amount of time servicing the
interest on these loans and repaying installments.
With many lenders offering car finance, it becomes very
confusing which loan option and which lender to choose. Choosing the right car
loan is extremely important since you enter into a relationship with the lender
for a long term. Repayment of the loan also affects the borrower’s credit score
which is why it is very important to select the right loan.
Here
are some factors to help you choose the right car loan for your needs:
Eligibility criteria: It is very important to check the
eligibility criteria prescribed by the lenders for loans. The eligibility
criteria differs from lender to lender. If you opt for auto finance, then the
auto company will only provide finance for their own cars and not for other
models. Other lenders may have strict income and employment guidelines. Knowing
the eligibility criteria for a car loan is extremely crucial to selecting the
right lender. You must pick the lender who does not have extremely strict
guidelines and that you meet those guidelines. Sometimes to accommodate
borrowers, lenders give loans at higher rates of interest.
Interest rate: The rate of interest is quite crucial when
you look at a car loan.
The interest rate differs from lender to lender. You can find out the current
rates by scanning through the lender’s website. Most lenders have their rates
of interest clearly displayed. Car finance companies may offer a better rate of
interest for picking specific models of a car.
Fees and other charges: Another very important consideration
are other fees and charges like loan processing fees, pre-payment or
foreclosure charges, late EMI fees etc. Apart from this, there are other fees
like cheque bounce fees, amortization statement fees etc.
Choosing the right car finance depends on your loan
requirement and the above factors. The right car loan must provide you finance
without constraining your ability to repay the loan. The overall interest, fees
and charges must not be so high that they overburden you while making
repayments. Each lender provides a car loan EMI
calculator for free on their website which you can use before you make a
car loan application. This will help you set the right tenure for your car loan
and ensure that you are able to service the installments.
Another factor to consider are seasonal discounts and offers
by lenders. Depending on festivals, lenders may provide discounts and offers on
loans like waiving off loan processing fees. If you’re considering an auto
loan, be sure to factor in these seasonal benefits and then choose a lender
that is providing good benefits.
