Most car buyers spend a lot of time in deciding their car but not much on getting the best car loan. A bit of time spent on reviewing and comparing car loans can save you a lot of money. Here are some basic things you should know before you take a car loan.
See if you have any pre-qualified with your current banks. The bank which has your salary account is your best bet. They usually put out pre-qualified offers for their best customers. These offer the best interest rates and minimal processing time.
Check your credit report
Pull your free annual credit report from CIBIL or one of the other three bureaus (Equifax, Experian, CRIF). Ensure all the loans, credit cards in the report are accurate. Knowing your credit score will help you negotiate better with the banks. If the score is low, you may want to fix the underlying reason and improve the score before you go for a loan. This can save you several thousands of rupees in interest down the line.
Always check and compare loan offers from different banks. The bank offers might be similar but there are fine differences in terms which can cost you a lot of money. There are several loan comparison sites which provide the loan information for products from all major banks and NBFCs.
Car Loan Fees and Charges
Banks have a variety of fees and charges on the loan. The two most important to watch out for are
a. Processing Fee: This is what the customer needs to pay for processing the loan. Usually varies from 0 – Rs 5000. This is something you should try to negotiate with the bank.
b. Pre Closure charge: This is the amount you need to pay if you want to pay off the loan and close it. Ranges from 0 to 0.5% of the outstanding. Some banks do not let you foreclose in the first 2 years of loan.
Check your eligibility and affordability
Check much loan you are eligible for and how much you can afford.
Eligibility: This is a function of your monthly income, other EMI’s and the car you are looking to purchase. Banks require the customer to make a down payment usually between 0 – 20% of the on road price. The 0% down payment is a rare offer given only to the best of customers. Affordability: Calculate your EMI for the car loan and ensure you can manage that within your means without affecting your other plans. You can calculate your Loan EMI using the Emi calculator here