Owning a car of your choice is a dream come true and it has now been made easy with the help of car loans, which are made easily available by various banks and finance companies in India. However, the borrower has to be judicious to pick the right one.
Here are 6 things to consider when taking out car loans in India:
1. Eligibility and credit history
The basic requirement for acquiring a car loan is your eligibility and credit history, which will determine whether you get the loan or not. The lenders will find out whether you earn enough to pay out the monthly installment comfortably and also have a look at the income tax returns of the past three years before approving the car loan. They will also go through the credit score of CIBIL/Credit Information Bureau India Limited to ensure that you have not been a defaulter in case of any other loans on previous occasions.
2. Down payment
The next factor to consider while taking out car loans in India is the down payment you have to pay as the margin money in the deal. It may vary from 15% to 20% on the total loan amount and a higher down payment means that your EMI becomes smaller in amount. You have to get the right balance between the down payment as well as the EMI so that you are comfortable in paying both of them.
3. Rate of Interest
The next factor which plays a key role in selecting the car loan package is the rate of interest charged by the bank or finance company. It may vary from one bank to another and you may need to make a comparison between them and choose the one which gives the best deal.
4. Processing Fee
Processing fee is another vital issue while determining the best loan package for an individual. The amount of processing fees varies from one bank to another and it depends upon the loan amount. Also, you need to have a look at other related charges such as documentation fees and late payment charges to make a proper comparison between car loans offered by different banks.
5. Foreclosure Charges
Sometimes, you may want to clear out the loan before its tenure has been completes and in such a case, the bank is likely to levy foreclosure charges on you. This may go up to 2 to 5% of the outstanding balance. You need to compare the foreclosure charges of various banks to arrive at the most favorable loan option.
6. Bundled Insurance Plan
Some banks may offer a special incentive in the form of bundled insurance plan along with the car loan, which may come up as a smart choice for the borrower in the long run.
In the end, it would be a wise choice on the behalf of the borrower to look for some specialized package deals available as a result of tie ups between car sellers and banks or finance companies. These may be a bit expensive as compared to the banks but the service is usually prompt and client friendly. You can choose the deal according to your requirements after careful scrutiny and comparison between all the available options.