7 Best Car Loan Tips to Follow in 2022
10 Dec 2021
Table of Content
With the increasing need to travel short and long distances in comfort and safety, buying a car has become a necessity in recent times. Now, cars are expensive, and you may need a bit of help with financing the vehicle of your dreams. This is where a car loan can prove to be helpful. You just have to make a down payment on your vehicle and let the loan financer take care of the rest. Moreover, your loan EMIs typically start from the next month and can be easily planned to fit your budget.
Finding a car loan is easy; however, getting the right car loan requires a bit of time and research. To make things easier for your, here are 7 car loan tips that will help you get the right finance for your dream wheels.
Plan your budget in advance
Before you apply for any type of loan, it is important to calculate the maximum loan amount required by you. This is one of the most important car loan application tips that you must put into action. Planning helps you estimate your monthly EMIs and create a repayment plan that fits in your budget. The maximum loan amount that you are eligible for depends on your CIBIL score, age, and salary. Hence, you should also check if you are eligible for the loan amount you wish to procure from the creditor. Ideally, you can receive a maximum of up to 90% of on Road Price of car , in the form of a loan, while the remaining 10% must be paid as margin by you. However, some lenders also finance up to 100% of the car’s costs.
When planning your budget for a car, do remember to add registration charges and other such minor fees as well in your calculations. This way, you won’t fall short of funds if the need arises.
Choose a car in your budget
Once you have finalised the budget that you can manage, the next step is to find the car that fits in this budget. The car model that you choose to buy will depend on the purpose of your purchase. For example, a spacious sedan or an economical SUV or MUV will be great choices if you are looking to purchase a vehicle for going on drives with your family. On the other hand, if you are looking to buy a car for solo rides to the office, you can opt for a hatchback or a compact two-door car that is economical and provides great mileage.
When buying a car, research a few options online and then go to vehicle showrooms to test drive the models you like. Compare the various features and see which vehicle is affordable in the long run. You can also use the different car aggregator websites to compare the different cars that are available in your budget.
Choose the right loan tenure
A longer loan tenure increases the interest you pay while choosing the shortest possible tenure helps you keep the interest on your loan at the bare minimum. Car loans typically have a maximum tenure of 7 years.
If you wish to finish your loan as quickly as possible, you should consider taking a car loan with the shortest possible tenure. This, however, will result in an increase in your monthly EMIs. On the other hand, choosing a long loan tenure reduces the amount you need to pay as your monthly EMIs but increases the interest amount that you need to pay for procuring the car loan. Try to strike the right balance when taking a car loan. Choose a tenure that will uniquely fit your monthly budget and help you save on extra interest. So, if you can finish paying a car loan in five years, do not simply stretch the tenure to six or seven years even if the lender allows you to. This is one of the car loan tips that will help trim down the money you pay in interest.
Compare car loan interest rates and other charges
When buying a car loan, make sure to compare the various rates of interest charged by different lenders. The rate of interest heavily impacts the total amount that you will need to repay to the lender. Finding the lowest possible rate of interest will really help you save on money. Also, remember that you will also need to bear ancillary costs like the processing fees when taking a car loan. Make sure to compare these fees levied by different lenders to find the loan provider whose charges suit your pocket. Do also ask what kind of penalties are levied in case of late payments or missed payments. As rates of interest and charges keep changing, this tip can help you find the best car loan in 2022.
Maintain a healthy credit score
If you have a credit score above 701, you can easily apply for a loan and negotiate for lower interest rates. A high credit score also helps you procure loans of a higher value. Maintaining a healthy credit score proves that you are a creditworthy individual with a sound history of repaying your debts. Having a good credit score also can make you eligible for pre-approved loans. So, it helps to look into your credit score before you apply for a loan. Take steps to clear existing debt and pay your credit card bills in full and on time as doing this helps bring up your credit score.
Do not miss your monthly EMI payments
Missing your EMIs will have a negative impact on your CIBIL score. Missing payments also increases the amount you need to pay the following month due to penalties or late fees levied by the lender. If you have defaulted on the EMI payments of your car loan for three consecutive months, the lender considers the loan provided to you as an NPA (Non-Performing Asset). Due to this, the lender can take possession of the vehicle financed and you will lose your car.
Hence, being regular with your monthly EMI payments is beneficial for you in so many ways. It gives a boost to your CIBIL score and helps you avoid any extra penalties that you may incur due to late payments. In order to avoid late payments, you may want to consider setting up automatic debits of the EMI from your bank account. This is really great car loan advice that can help you save a fortune in fees and penalties.
Stay connected with your bank
Loans are granted by lenders only after they gain trust in your abilities to repay the debt. Communication plays a significant role in building trust between the lender and the debtor. If you face any problem with the repayment of the loan, it is better to communicate the same with your lender and be transparent with them about your issues. Lenders typically do not like to take the legal route to recover their money as it can turn out to be quite expensive. Due to this, they help you by pushing your EMI payments to the consecutive months or by decreasing the monthly EMI amount by increasing your loan tenure. They will work with you to find a suitable solution, so always keep them informed about your situation.
It is quite important to choose the right car loan as this decision will also impact how well you can repay your debt. Moreover, your loan does have a direct impact on your CIBIL score. Follow the car loan tips mentioned here to get the loan option that best suits your needs and budget. This way, you can make a guided choice that will truly give you peace of mind.
Bank of Baroda offers car loans at attractive interest rates with up to 90% financing. Our loans are available for salaried individuals, businessmen, and even NRIs and PIOs. Get in touch with us today to finance the vehicle of your dreams!
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