Things to Check Before Applying for a Car Loan

Things to Check Before Applying for a Car Loan

Gone are the days when you had to shell out loads of money at one go to purchase a car. Now you can easily avail a car loan and get your car home sooner. You can apply for a car loan online and eliminate the hassle of visiting the lender in their office. There are many Banks and NBFCs which provide online car loans. Yet there are some important things which you should keep in mind before applying for a car loan with the lender.

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1. Credit Score

This is the most important criterion which every lender will scrutinize before approving your loan. You need to have an impressive credit score to get swift loan approval. You can apply for free credit report from credit bureaus. Know your credit score before you apply for your car loan.

2. Loan Interest Rates

As this type of loan is getting popularity the financial institutions are offering competitive car loan interest rates. The interest rates for a new car loan and a used car loan are often different. Every lender offers interest rates based on the loan amount, car model, credit score of the applicant, repayment capacity etc.

3. Loan Amount

Some banks or NBFCs will offer 100% financing for your car while some will offer 80%-90%. The loan amount which gets approved will depend on your age, monthly income, credit score etc. Avail a car loan only for the amount that you need and not more. Look at the lender’s eligibility criteria and check your eligibility before applying.

4. Loan Affordability

You need to be absolutely sure of the amount of your loan. Based on this you can fixate on the tenure as well as get an idea of the amount of EMIs each month. You can use the car loan EMI calculator available on the lender’s website. Usually, lenders approve loans of applicants whose EMIs are within 40% of their net monthly income.

5. Tenure of the Loan

It is advisable that you choose your loan tenure wisely. The longer the tenure the higher the interest rate, the shorter the tenure, lower the interest rate. Choose a minimum loan repayment term. This will lead to higher EMIs but you will repay your loan faster and save on the rate of interest.

6. Fees & Charges

There are a few charges and fees involved once your loan gets approved. The processing fee is a fee which every lender charges. You need to read the fine print given by the lender and check the rates of all the fees and charges involved.

7. Prepayment Charges

If you have a sudden influx of money and you wish to use it to repay the loan, then you can do a prepayment. This is a form of early repayment. Certain Banks and NBFCs charge prepayment fees and also have a cap on the amount and the number of times you can prepay. Hence choose a lender which has low prepayment charges and less number of other limitations.

There are many car loan lenders who will provide you attractive offers. Compare these offers and choose the one which suits you best.

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