Car loans are financial support provided by banks in order to help the borrower purchase a car. Moreover, car loans can be classified into three categories, new car loans, used car loans, and car against a loan. But today we will look into the details on how to select the best car loan.
We will look at a few rules that must be followed in order to select the cheapest and best offers in a car loan scheme:
Firstly an individual should select the car along with the model and brand and then choose a car loan scheme that will provide enough loan amount for you to suffice. Although new car loans do not pay for the complete price of the car but pay a major portion of it. Thus the borrower has to have minimum savings to purchase his/ her dream car. Thus one should select a car loan keeping in mind the loan amount and also the repayment capability of an individual.
Salaried employees have an advantage as they can be granted higher loan amounts based on their annual income, with financial institutions approving credit money based on that amount. Thus an individual should do his or her own market survey in order to avail the car loan scheme that offers them the maximum quantum of loan.
There are a few factors like down payment amount and loan margin that should be kept under consideration before availing of a car loan. If an individual pays back the loan in down payment then he/ she saves a lot of extra interest charges, which the borrower might have to pay if he had chosen the option of EMI instalment. As we know that while availing of car loans the bank pays for the major portion of the purchase amount, but the rest of the margin, which is known as the loan margin is to be paid by the borrower himself. The loan margin differs from one bank to another. Thus you should be selecting an institution keeping in mind about the down payment option and loan margin.
One another aspect of a car loan is the interest rates charged on the principal amount. This interest rate generally ranges between 9% to 15% among the reputed banks and NBFCs. Further floating interest rates should work well for the borrowers, because of its market fluctuations and rate reduction which could benefit an individual while repaying in a long term car loan.
Financial institutions like banks and NBFCs offer a major portion of the loan which estimates around a minimum of 80% to a maximum of 90% of the car price. The remaining margin is to be provided by the borrower himself from his/ her accounts. Some banks also provide a 100% of price value, but only in the case of used car loans or car against loans.
Repayment tenures have a huge impact on the borrower’s repayment amount. If an individual is going for a long term loan, then he ends up paying more as he pays for more interest charges. While on the other hand if an individual takes up a short-term tenure, then he pays lesser interest charges, thereby saving his/ her money. Thus one should choose an institution that offers flexible repayment tenure between 1 to 7 years.
While going to avail of a car loan one has to pay additional charges to avail the loan facility, which includes processing fees, documentation fees, prepayment fees, and more. Thus before availing of any random organization an individual should check the extra fees and charges added to the debt.
Some of the best financial institutions offering loans are SBI car loan, leading at the top, and others like ICICI bank car loan, Canara Bank car loan, HDFC bank car loan, and bank of Baroda car loan. These are the leading institutions offering the best facilities under the scheme of a car loan.
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