Owning a car has become really simple with the availability of quick online loans, which involve a few easy steps and personal details. Though the process of availing a car loan has become much easier, one needs to follow some steps to get the best deal.
Checking eligibility for the loanThe first step involved besides selecting the brand and the model of the vehicle is to check your eligibility for the loan. You can visit the websites of most banks and check your eligibility. You also have to decide on the loan amount, depending on how much you are willing to clear as a down payment -- the more the better as it will reduce your monthly EMI outgo.
Apply for loan either online or offlineYou can apply for a loan either online or by visiting your preferred bank branch as soon as you have decided on all the above factors. After submitting some basic documents like income and identity proof, the funds are likely to be cleared by the bank. Having said that, here are some tips that can help you get the best car loan deals.
Monitoring credit scoreSix to eight months before availing the car loan, you should start monitoring your credit score. Although it is an optional process, having a better credit score will improve your chances of getting a better pre-approved vehicle loan. A credit score above 750 is considered good and increases the chances of loan approval. Since banks will check your credit report before approving your loan request, it is ideal for you to start monitoring it yourself in advance as it will also leave you with some time to improve it in case it is below 700.
Compare loan interest ratesIt is always ideal to visit a lender where you already have an account as they are likely to provide you with a better interest rate, provided you have a good repayment history. However, you should also explore online to find out if any other bank is willing to offer a lower interest rate. Be sure to explore the rate offered by finance companies besides banks.
Don't forget to check processing feeWhile it is often ignored, it is important to check the processing fee on the car loan. The processing fee could easily be around 2 per cent or more of the entire loan, meaning you could end up paying thousands of rupees towards the fee. Experts often recommend people to buy a vehicle during the festive season as banks have offers where they waive off the entire processing fee.
Strike a balance between EMI and other monthly expensesWhen you have decided on all the above factors, decide on how much EMI you are willing to pay toward your car loan. Make sure to select an EMI tenure that reduces your interest rate, but does not impact your other monthly costs. Therefore, it is ideal to opt for an EMI which charges reasonable interest and also does not overburden you every month.
Ensure minimum foreclosure chargesThere may come a situation when you would want to foreclose your loan or make prepayments to lower your overall loan interest. In such a scenario, you will have to pay the bank prepayment or foreclosure charges on the loan at a fixed rate. It is ideal to talk to the bank about foreclosure charges at the time of availing the loan. You should always opt for a loan where prepayment or foreclosure charges are minimum.