Getting the best car loan takes a bit of smart planning and research. You need to understand your options and potential pitfalls so you don’t end up paying more than you should. If you don’t take care, your car loan could cost you much more. In this article we’ll look at some key tips to get the right car loan for you.
Research And Know Your Options
Before you even begin shopping for a car loan, you need to know your options. There are a lot of loan products out there, and you’ll end up spending a lot of time sorting them out if you just jump in without doing your research. Start your research by understanding the different types of car loans. They include:
- Retail loans: You apply directly to a lender and are responsible for obtaining a loan. If approved, you can then use the amount borrowed to purchase a car.
- Wholesale loans: A wholesale loan is similar to a retail loan, but the lender is a third party and you’re not personally borrowing the money.
- Lease: With a lease, you pay a set amount for the car and then make payments to the leasing company who then owns the car. The lease runs for a certain period of time and then the car is returned to you.
- Cash purchase: With a cash purchase, you bring a certain amount of money to the car dealership and then take ownership of the car immediately.
- Financing: The terms of a financing loan are determined by the dealer, so you don’t have complete control over the deal.
- Asset-based lending: It involves you selling some of your ownership in a business to one of your lenders for a loan. This can be a good option for some, but keep in mind that it does involve some serious risk.
Guideline for Getting the Best Car Loan
Be transparent with your finances
The best way to ensure you’re getting a good car loan deal is by being transparent with your finances. You need to know exactly what you’re capable of borrowing, which will help you negotiate a better deal. Be honest with any financial institution you deal with, and don’t try to pull any fast ones. You want to make sure they know exactly what you’re borrowing and why. You can also use this negotiation opportunity to make sure you’re getting the best deal on your car loan terms. The terms of the loan will affect how much you’re paying each month and what you’re paying on. Make sure you’re aware of these terms and how they affect you, so you know what you’re getting.
Know what you’re paying for
Another important tip is to know exactly what you’re paying for. There are a lot of hidden costs with car loans, so you need to be aware of what you’re paying. First, you need to understand what the loan amount is really covering. The loan amount is the amount you actually owe the lender. The interest on the loan amount is what you’ll pay off the loan. The majority of the cost is the interest. In addition to this, you need to understand the length of the loan as well as how much you’re paying each month. The length of the loan will affect the amount you pay each month, so you need to know what you’re paying each year.
Don’t just ask for the lowest rate
One of the biggest mistakes people make when getting a car loan is simply asking for the lowest rate. While the best way to go about this is to look at a range of rates, you also need to know what you’re getting. The problem is that you don’t have a good idea of what you’re getting with the best car loans. Some lenders will try to hide some of the costs so they don’t look too bad. Others may try to hide the true cost of their loan. With the best car loans, you’ll want to look closely at a range of costs. You need to look at what you’re paying in interest as well as what you’re paying in fees. You may also want to look at the length of the loan.
Negotiate and be flexible
When getting a car loan, you may have to sign a contract. However, you can negotiate a number of terms. One of the most important things to negotiate is the interest rate. Make sure you’re not paying more than you need to. The best way to negotiate the interest rate is to compare it to other loans. There are a number of websites that allow you to do this. Comparing rates is a good way to make sure you’re getting the best deal. The other thing you can negotiate is the length of the loan. There are a lot of loans out there that have a fixed length of time. While this may help you get the loan faster, it also costs you more.
Check the fine print and conditions
When you’re ready to sign on the dotted line, don’t just sign the loan documents. Take the time to read them and make sure you’re not agreeing to anything you don’t want. Make sure you understand the repayment terms and conditions. Some companies will try to sneak in hidden costs and terms. These terms can have a huge impact on your overall cost. Make sure you’re okay with everything. If anything seems too good to be true, it probably is. Make sure you’re happy with the terms of the loan.
To prove your eligibility, you’ll need to provide certain documents. Though this too is specific to different lenders, the common documents will be:
|Identity Proof (any of the following)||Aadhaar
Voters ID card
|Address Proof (any of the following)||Aadhaar
|Proof of Income||Form 16
Salary slips if you are salaried
Latest Income Tax Returns
Bank statements going back 6 months
Eligibility Requirement And Criteria
|Age||Age must be between 18 years and 75 years.|
|Income||The minimum net income of Rs 20,000 monthly.|
|Years of Employment||At least it should be an employment of 1 year.|
|Employment||Self employed – salaried.|
Best Car Loan Interest Rates in India for 2023
|Bank Name||Car Loan Interest Rates||Processing Fee|
|Bank of Baroda Car Loan||7.00%p.a. onwards||Rs.1,500|
|Canara Bank Car Loan||7.30%p.a. onwards||0.25% of the loan amount, subject to a minimum of Rs.1,000 and a maximum of Rs.5,000|
|Axis Bank Car Loan||7.45%p.a. onwards||Minimum of Rs.3,500 and maximum of Rs.7,000|
|Federal Bank Car Loan||8.50%p.a. onwards||Contact the bank|
|SBI Car Loan||7.20%p.a. onwards||New Car: Nil (offer valid until 31 January 2022)|
Car Loan – Checklist to Follow While Applying for it
|Apply for a car loan||Compare all offers available||To find the loan that offers you the highest loan amount and the most affordable interest rate|
|Submit Income Proof||Bank Statement (last 6 months) Pay-Slips (last 3 months) IT- Returns (last 2 years)||Lender wants to establish your ability to repay the loan|
|Submit Proof of Address and Identity||PAN Card, Voter’s ID, Aadhaar Card, Passport, etc.||Lender wants to establish your nationality, identity, and permanent address|
|Credit History||PAN Card||Lender wants to check your past credit records and establish if you can be trusted to make regular repayments|
|Information About Vehicle||Sales Receipts from the showroom from where the vehicle was purchased||Lender must confirm that the deal was affected as intended|
|Proof of Insurance and Driving License||Copies of the vehicle’s Motor Insurance and your Driving License||Lenders must establish that all laws and protocols are followed with regards to the purchased vehicle.|
Features and Benefits of Car Loan
Car loans in India are offered with benefits and features. The following section will take a generalized approach to car loans. Individually, car loan lenders have customized deals for the customer base.
- It enables you to purchase a car even if you don’t have all the money right now.
- Most car loans finance the on-road price of a car.
- With no down payments, most car loans will even finance 100% of the on-road price.
- Some banks also offer financing in the crores, and you are not limited in your choice of cars.
- A car loan offered in India is the most secured loan, meaning the car serves as the security/collateral for the loan.
- A car loan is simple if compared to other loan products. People with slightly unsavory credit scores can avail of one.
- Many car loans in India often offer fixed interest rate options. You should be assured of a fixed amount that needs to be repaid monthly.
- Lenders will offer interest rates based on your credit score to help you get a cheaper loan.
- Car loans are not meant only for cars. But a used car loan can also help you buy a pre-owned car.
Car Loan – Process to Get the Loan Approved Faster
Especially if you want to receive funds to purchase the new or used car that you have had on your wishlist for a long while, then it is better for you to opt for a pre-approved loan. Inorder to avail such a loan, you have to follow these steps to quickly receive the required funds.
- You can track your credit report to check your standing of credit score. A score of 750 or more should get you a lower interest rate. However, the interest rate for a score of 750 will be slightly higher. So , if you have defaults in your report, or have a very low score, your application has a high chance of getting rejected.
- Paying Bills on Time to get a loan to purchase your dream car as soon as possible, with a minimum monthly pre-tax income along with a manageable debt-to-income ratio (DTI). Also, sometimes it is absolutely not possible to change one’s income, you can improve your DTI by paying off all your pending debts.
- Looking for Car Loan Options as there are multiple options available in the market. However, you can get a loan to purchase your new or used car. You should track the car loan interest rates of other banks as car financing firms help you to find the one that fits your needs.
- Borrowing as Less as Possible , in order to pay a larger amount as down payment, you can also reduce that sum that you want to borrow that equals to the price of your dream car. If you borrow a lesser amount, then you might have a higher chance to be in a good stature to repay your loan quickly .As any smaller loan amount means smaller EMIs or a shorter loan tenure period.
- Choose a Plan That is for Your Budget and your capability as an applicant greatly impacts the approval of a loan that you have applied for. You have to decide to purchase the car that you have always wished for, you should also ensure that you choose a scheme that you actually afford. Now if you are already paying EMIs for other loans that you have availed, you should make sure that you can also pay the EMI of the car loan only that you have chosen.
- Now getting a Car Insurance with Complete Coverage is easier ,as offering a loan has always been the main concern of banks and NBFCs is not to incur any losses. So, having full-cover insurance is a requirement for many organizations before availing a car loan as it will help you recover the balance debt in case there is an accident with the borrower.
Availing the best car loan is all about doing your research and understanding your options. Once you know what you’re getting, it’s important to negotiate the interest rate and terms. That will make sure you understand what you’re paying for and what you’re getting.