So you’ve picked out a beautiful sleek car after a lot of nail biting and you’re already imagining driving it.
Stop. Are you sure you’re ready for your car loan though?
Getting a car loan may look simple in today’s instant loan era, but getting the best rate for your car loan is the most important.
Here are 5 tips that may help you.
- Pre-approved dealer loans may not be your best option
Pre-approved loans offered at dealers are meant for the convenience of the car buyers but don’t come with the best rates.
The dealer may throw in some discounts on car accessories if you opt for the car loan, but remember, a costly car loan taken at higher interest rate can virtually dent your pocket throughout the loan tenure. So avoid saying ‘yes’ to any car loan offered by your car dealer and spend some time looking through the various options to find the best one for you. - Choose your car model wisely
The car model you choose matters when it comes to your car loan interest rate. Not many people are aware that the interest rates for car loans differ for different car models with the same bank. The loan tenure and the segment of the vehicle also play a significant role in deciding the rate of interest.
For example, interest rates for less popular or outdated models are higher than those in the popular and premium category. Also, second hand cars come with higher rates compared to first hand models. - Choose a bank with an existing relationship
Considering the bank where you already have your salary account is a good way to get the best rates. If you default the loan, they always have an option to block the money from your account, thus making you a safer candidate.
If the bank has a tie-up with your company, it may help you get better rates based on the employer-bank relationship. You can also consider the bank where you have a good FD or the one where you took a home loan, as long as your track record is clean. - Time the loan application right
The growing competitive loan market has means that banks have monthly targets to achieve. So approaching the bank near the month end, during festive time, close to the half year mark or the year end, is always a good idea.
To meet their disbursement targets, they would rather offer a better deal to a customer rather than letting him go to their competitor.
Loan melas conducted by banks are also a good opportunity for applications as these melas are conducted for expressly meeting targets with maximum possible deal closure. - Bargain using your credit score
Do you know that your credit score is a good tool to bargain for a better rate? Many people do not pull out their credit scores before placing a loan application, and are not even aware of their scores.
People with good credit scores can expect a slight relaxation in terms of norms and interest rates, but unless you ask, the bank may not offer it.
2 quick facts about interest rates
- There is no difference between a private bank and a public bank for getting better interest rates on car loans. Both types of banks have competitive rates today. The only difference is that some private banks offer instant loan approvals, while public banks may take a couple of days to approve the loan.
- A minimum down payment can mean more interest outflow from your pocket. Paying a higher down payment means your total loan amount is lower, and thereby a lower interest payment and reduced EMI.
Never take a car loan without comparing first. Also, consider other charges like foreclosure charges before finalizing a deal.
Additional read: Car loan trends over the last decade
YOU MAY ALSO WANT TO: Make sure that EMI is not burning through your savings – Car Loan EMI Calculator