It is important to be well informed about Car Loans before you apply for one. Here are five common misconceptions about Car Loans that many of us believe.
So you saved up money in a Recurring Deposit or a Fixed Deposit and are now planning to buy a car. Great! Several prospective car buyers choose to take a Car Loan to finance their purchase. This is mainly because of the convenience a Car Loan offers. A Car Loan is a short to medium-term loan that can help you get yourself a cool set of wheels!
However, it is important to be well informed about Car Loans before you apply for one. Here are five common misconceptions about Car Loans that many of us have.
Get 100% financing on your automobile purchase
Don’t get roped in by misleading advertisements pushing 100% financing for your new car. This means that the Car Loan will cover the full cost of your car. If this is true, such a loan is likely to have a much higher interest rate.
A large number of automobile loans are given for up to 90% of the invoice value of the vehicle. For instance, if the value of your car is Rs. 6 lakhs, a sum of at least Rs. 50,000 will have to come from your own funds.
Some lenders also offer 80-85% of the value of the car. It all comes down to the applicant’s relationship with the bank or lender. Your Credit Score also matters, you know.
Go for a 0% interest loan
A common card many car dealers play is the 0% interest loan option. Here’s a word of caution. An interest-free loan is not exactly hassle-free and economical. For interest-free loans, the maximum term is lower than three years. This gives a borrower limited flexibility with the loan. The down payment on an interest-free loan can also be increased to decrease the loan amount.
Must Read: BankBazaar’s Car Loan EMI Calculator To The Rescue!
Take a loan through the car dealer to avoid rejection due to a low Credit Score
Your Credit Score cannot be influenced by your car dealer. A poor Credit Score will mean that you need to pay a higher interest. Do make sure the dealer does not increase other loan-related charges to compensate for giving you an interest-free loan.
Get the best interest rates if you apply for the loan through a dealer
Hold on! This is so no true. If you apply for a Car Loan through your car dealer, it is more likely that the dealer will not compare offers and give you the best deal. Do the homework yourself to bag a good deal on your Car Loan.
Additional Reading: 9 Tips To Manage A Car Loan
Car Loan? Not for a used car
Completely untrue. You can definitely get a Used Car Loan. Remember, Car Loans are not just available for new cars. Used Car Loans help you save a sizable sum of money because they are more affordable. The only thing you need to remember is to ensure that your vehicle’s date of manufacture falls within the lender’s parameters.
Also, remember that opting for a longer repayment tenure will mean an increased payment amount. This is because you will have to pay interest for the entire tenure.
Now that you are wiser about Car Loans, consider your options carefully and make an informed decision.