The Buyt Desk
Once you have finalized your dream car, arranging finance to buy the car is the next task. Here is how you should choose a Car loan.
Before zooming out on your dream vehicle, you do lots of research and test drive. Similarly, before finalizing on the vehicle loan you should do a good search in the market and pick the best suited for you. Never blindly take up the first loan that the dealer offers you. A vehicle loan should make your ownership an enjoyable, smooth and hassle-free experience. The younger generation is equipped with the smartness to take advantage of car financing options. Banks and finance agencies keep coming up with new options for vehicle buyers. There are no standard things when it comes to vehicle loans. Each institute has its own terms and conditions. Study all options well and only when well informed can you make a better choice and the most out of the vehicle loan.
How to choose a vehicle loan?
There are a few things and tips you must consider to make the right choice of vehicle loan.
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Accurate and complete documentation – All banks and financial institutes lending loans follow the Know Your Customer norm. They check your documents and credit score much before approval of the loan. You have to complete all the documentation processes for KYC. Before going to vehicle dealers, it would be a good choice to get a pre-approved vehicle loan from the lender of choice. This ensures faster processing of the vehicle loan. Also, a pre-approved vehicle loan is additional leverage when negotiating with the vehicle dealer. It offers you to negotiate the deal and get more add-ons or lesser fees.
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Interest Rates – Get interest rates and quotations from all lenders. Compare them before finalizing. Vehicle loans do not have standard rates and even a small difference of a few points will amount to a huge repayment amount. The interest rates differ from lender to lender and can be floating or flat. Go for the one which offers a lesser rate of interest.
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Loan repayment tenure – Loan repayment terms are very important. Some lenders may offer you smaller EMI for a longer duration, which might be lucrative. But when you calculate the total repayment amount at the end of your tenure, you would be paying a huge excess amount. Always select the repayment tenure that amounts to the least repayment amount. This way, in the long run, you will save a lot of funds.
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Schemes and offers – Almost all lenders offer some deal and add on offer on their vehicle loans. If you have a good credit score then they might offer you better-customized deals. Always look for offers the lender provides.
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Maximum Financing – Always opt for the loan that offers maximum financing so that the down payment burden is minimal. Some even offer 100% financing for on-road prices where you do not need to pay any down payment.
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Instant Disbursement – Banks offer pre-approved vehicle loans and this means minimum to no documentation when buying a vehicle through their loan. If your lender has a tie-up with your vehicle dealer, disbursement of the amount is direct, easy and quick.
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Loan EMI – There are many apps that help you calculate EMI based on the interest rates. Calculate EMI using the EMI calculator for all your loan options and then choose the one with the best interest rate.
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Processing fees – Different lenders charge different processing fees. Compare fees of various lenders and make informed choices.
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Service tax – Different lenders charge service tax in different ways. For some, it is a one-time lump sum payment and for some, it is yearly.
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Foreclosure penalties – Another important factor to look into is foreclosure penalties. Many loans take do not know about the foreclosure clause. Different lenders charge different foreclosure rates. Compare rates of various lenders and then choose wisely.
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Late payment penalty – Compare the late payment fees of various lenders and choose the one that has the least fees.
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Understand your insurance – Have adequate insurance coverage for your vehicle. Do not blindly buy the vehicle insurance your dealer offers you. Study about various vehicle insurances and then pick the one that suits you the best with maximum coverage.
Summing up
Compare the schemes on the basis of all the above factors before finalizing the loan source. You can use the apps available online to compare the various fees, interest rates and other costs. Go through terms and conditions carefully. Transparency from both lender and buyer helps to have issue-free closure. Also, consider quick sanctions and easy disbursement of loans. Lenders’ quality of service matters the most to have a smooth journey from buying a vehicle to closing the loan. Look for online services for ease of transactions. Many apps are available to calculate and compare all values of loans.
