7 Things To Consider Before Applying For A Car Loan

By BankBazaar | December 18, 2016

7 Things To Consider Before Applying For A Car Loan

During the course of a lifetime, every individual will most likely face three important financial decisions – getting married, buying a house, and buying a car. While there are a lot of emotions involved in all these decisions, a certain amount of practical thinking is also required to figure out ways to save money.

Today, we will focus on the factors that you need to consider before buying a car or taking out a Car Loan. Everyone wants to own their dream car and are in such a hurry to take it for a spin that they often overlook the decision-making part of buying a car. Hit the brakes and mull over these 7 questions before rushing into an impulsive investment:

Additional Reading: Most Popular Cars In India 2016

Why do you need a car?

Commuting by car is one of the most comfortable ways of travelling. But, different individuals use their cars for different purposes. If you are going to drive to work, your car needs to endure the traffic and pollution. In that case, a high-end luxury car is not a wise choice. If you plan on going on long drives over the weekends, then the mileage of the car becomes more important than its looks. If you want to take your car out on special occasions and flaunt it, then high-end luxury cars are the obvious choice. So, before you buy a car, think about WHY you need a car, and then decide wisely. Got it?

Additional Reading: 4 Cars To Consider If You’re Planning On Buying One

How do you feel about second-hand cars?

Depending on your need, you can choose to buy a second-hand car instead of spending on a brand new car. If you want to use the car for the basic purpose of commuting, and you aren’t too fussy about looks and design, then you might want to consider buying a second-hand car. With the rise of businesses that handle buying and selling of used cars, India has developed a huge market for second-hand cars. You can buy a second-hand car in good condition for almost half the price of a brand new one. However, it is advised that you buy a used car after a thorough check up since the amount you may spend on maintaining it could cost you more than buying a new car. So, make sure you calculate all these costs before taking the leap.

Additional Reading: Top 5 Cars With Great Resale Value In India

Can you handle the burden of a Car Loan?

Before you sign the application for a Car Loan, sit back and think carefully about whether you can actually handle the pressure of EMIs. Taking on a Car Loan with a high interest rate, over a long tenure, can actually take a toll on your finances. And, if you are already paying EMIs on other Loans, it is advisable that you clear those off before opting for a Car Loan. So, take into account your monthly expenses and income before zeroing in on a Car Loan.

Additional Reading: 9 Tips To Manage A Car Loan

Can you negotiate the interest rate with the bank?

If you are on good terms with your bank, you can try and negotiate with them to get a Car Loan at a lower interest rate. If you have a good Credit Score, banks might consider offering the Car Loan at a lower interest rate. Remember, the lower the interest rate, the lower the EMI and the lower the amount you pay as interest. Try negotiating with your bank to avail a Car Loan with diminishing interest rates instead of fixed interest rates. If you know how to bag a good bargain, you will certainly be in luck while negotiating with your bank. Good luck!

Additional Reading: Your Car Loan Interest Rate Guide

How much down payment can you pay?

Nowadays, a lot of banks offer Car Loans with 100% ex-showroom cost of the car. It might sound good at first, but it means that you have more debt to clear and higher EMIs to pay. Before you buy a car, think about the amount of down payment you can pay. The higher the amount of down payment, the lower the amount of the Car Loan you have to pay off, which in turn means lower EMIs.

Additional Reading: What You Need To Know About Down Payments

Can you manage the cost of maintaining a car?

Maintaining a car can be expensive. From timely servicing to rising fuel costs, maintenance of a car is a costly affair. So, before you apply for a Car Loan or buy a car, make sure that you will be able to manage the car’s maintenance expenses along with the Car Loan EMI. You can ask around about the maintenance of the car model that you are interested in. Your friends and family are more trustworthy options than anything else. Based on the information they share with you, you can decide if the maintenance costs, among other things, will actually fit your monthly budget.

Additional Reading: How To Maintain Your Car Without Spending A Dime

Does your bank charge a pre-closure penalty?   

Pre-closure of a Car Loan calls for a celebration as it means you’ve not just cleared your debt before the designated tenure, but also saved on the amount to be paid as interest. But, penalty charges on pre-closure of loans can put a dampener on your celebration. Find out if your bank has any pre-closure penalty charges before applying for a Car Loan. In fact, don’t miss out on reading all the relevant documents before signing on the dotted line. That’s the only way you will know if there are any hidden charges associated with the loan.

Additional Reading: Top 7 Banks For Car Loans

Now that you’ve taken these 7 important factors into consideration, you are well-equipped to choose the perfect Car Loan and the right car for you. Happy driving!

All information including news articles and blogs published on this website are strictly for general information purpose only. BankBazaar does not provide any warranty about the authenticity and accuracy of such information. BankBazaar will not be held responsible for any loss and/or damage that arises or is incurred by use of such information. Rates and offers as may be applicable at the time of applying for a product may vary from that mentioned above. Please visit www.bankbazaar.com for the latest rates/offers.

One thought on “7 Things To Consider Before Applying For A Car Loan

  1. Pingback: Investments As A Couple | BankBazaar - The Definitive Word on Personal Finance

Leave a Reply

Your email address will not be published.