Loans are quite common when it comes to people buying cars. But like anything in life, there are a few things you need to know before applying for one.
A survey found that almost 90% of people buy cars through car loans, but almost 50% of those people went to the loan agency without knowing a single thing about car loans.
This article will serve as a guide into all the things you should know before applying for a car loan at your local bank or loan agency.
1. Interest Rates
Source:broadwaycredit.com
The interest rate of the car loan is the first and most important thing you need to check before applying. But with so many banks and loan agencies out there, a smart thing to do would be to compare the rates and find the one that most suits you.
However, there are no certainties when it comes to car loans and the rates vary from floating to flat and from agency to agency.
2. Check Your Credit Score
Your credit score is a very important criterion in sanctioning loans when it comes to bank car loans. The credit score determines the loan repayment ability of the person, and a lower credit score usually would mean a lesser loan amount or higher interest rates.
Loan agencies work differently to banks when it comes to credit score, so a good thing to do would be to find more information on the subject of agency car loans.
Source:creditsquared.com
3. Documents
In some cases, getting a car loan is far from easy and you would be required to show past credit records and documents. Some of the necessary documents that loan agencies and banks need to verify are income proof, bank statements, valid address proof, photo id’s, income tax return, return statements, NOC record, and more.
4. Take Quotations
Another smart thing to do before applying for a car loan would be to get quotations from all the dealers of the desired car. Every dealer is tied with a different bank, so they will quote you different rates than what others would. In this case, its best that you visit all the dealers, take quotations of their rates, compare them along with the financial charges, and make a decision.
5. Wisely Select the Loan Repayment Period
Source:fundera.com
This one is very important as it determines the amount of time it would take you to repay the loan. Banks and financial institutions will tell you that a 7 years EMI is good per your budget, but don’t get carried away as you can calculate your total repayment in those 7 years and get shocked at the figured behind it. If you can manage it, always choose the minimum loan repayment period as it will save you more money than a longer repayment period.
6. Extra Fees
Always be wary of extra fees when going into banks and financial institutions for a car loan. Stuff such as service tax, processing fees, foreclosure penalties, and various other extra fees can greatly impact the total price you would be paying for the car loan. Always ask for transparency when applying for car loans, and avoid the banks and financial institutions that would deny you this request.
