As we are soon approaching the festive season, people are going to spend time purchasing new vehicles as it is considered auspicious for the time. Owing to the festivities, lenders and car manufacturers are also offering discounts on products and services, which makes it easier for buyers to get cheap car loans and buy their vehicles at a great price.
This time is particularly interesting for first-time vehicle buyers because of all the lucrative offers one might get at this time. But you should consider some factors before you think of financing your dream car during the festive season.
Here are the top 5 things about financing
Compare interest rates: A myriad of vendors is available in the market to offer cheap car loans to ease out purchasing vehicles. Based on different factors like car model, credit score, loan repayment capability, job profile and other things, one can easily get a loan with an interest rate of 8-10%. For a limited period of time during the festive season, lenders also offer special discounts on car loans, specifically for new customers. Some banks even run those offers for existing customers, which makes buying a vehicle easier.
Note your EMI amount and affordability: The EMI amount for a cheap car loan can be calculated using the applicants’ monthly income and the tenure of the loan. Whenever you’re purchasing a vehicle, it is necessary to have your financial goals in place so that your monthly budgets are not impacted by it. An EMI is a big commitment - so you must decide the amount accordingly. Ideally, you should opt for a higher EMI if you can afford it so that your loan can be paid off quickly.
Check for prepayment or early loan closure charges: When someone usually takes a car loan, it can go up to 3-7 years for repayment. While the EMI amount is higher when the loan is for a shorter period of time, it reduces drastically for a longer loan duration. However, you should always check with the loan lender about the prepayment or early closure process when taking a cheap car loan. Some banks might not allow you to make an early closure or even part payment until a decided number of EMIs are paid. Check these details with the bank before committing to any.
- Get your credit report: A credit report is a combination of a lot of factors of an individual. From their income level to their credit score, many factors contribute to ensuring a lender will give you a loan with ease. If during your background verification it is found that you are unable to repay your loan or even incapable to do so, it is plausible your loan request is denied. One of the most important factors here is the credit score. If your score is good, you can even get a cheap car loan. Well, at least cheaper compared to the time if you have a poorer credit score. If you have a credit score of 750 or higher, you have a great chance of getting the loan quickly and easily.
Processing fee knowledge is a must: Another reason the festive season is a great time to purchase a car is because of the processing charges that are usually waived off during this time. With the interest rate you’re already paying when you take out a car loan, it is a great idea if you can make the purchase at a time when this part of the loan is not to be paid. The processing fee usually goes up to INR 10,000.
Pro Tip:
Not a lot of people will tell you this but to make sure you get a cheap car loan, it is advised that you make a higher down payment at the time of purchase. If you decide to do so, the rate of interest on your car loan will reduce drastically.
Steps To Consider When Applying For A Car Loan
| Steps | Requirement | Inference |
|---|---|---|
| Apply for a car loan | Evaluate all the available offers | Shortlist the companies that offer the highest loan amount at the most competitive interest rates |
| Submit Income Proof | Bank Statement (last 6 months), Pay-Slips (last 3 months), IT- Returns (last 2 years) | The lender wants to evaluate your repaying ability |
| Submit your address and Identity proof | Aadhaar Card, Voter’s ID, Passport, PAN Card, etc. | Just to confirm your nationality, identity, and permanent address |
| Credit History | PAN Card | This is done by the lender to assess your past credit records and be ensured if you have a clean history or not of timely payments |
| Vehicle Information | Sales Receipts from the dealer from where you purchased your vehicle | The lender must be sure that the deal was executed as required |
| Insurance copy and Driving License copy as a proof | Photocopy of Vehicle’s Motor Insurance and your Driving License | The lender wants to assess that everything was done legally and guidelines are followed while purchasing the vehicle |