Your Guide To Understanding Auto Loans

Buying a car? Need help with figuring out the loan process? Worry not, this guide is here to help you and let you know all the ins and outs of the lending process. Owning a car in today’s day and age is considered a premium luxury. If you’re planning to buy one, it is necessary to know every possible way to make your buying process simpler. Be ready for this bumpy ride which will help you properly navigate through your purchase process.

Deciphering Car Loans

While playing poker you need to know all the cards you are dealing with, similarly, you need to know all the options you have before buying a car. Usually, two options are presented to you while going for a car loan, a new car loan and a used car loan.

If you are looking to own a pre-owned car, then the used car loan is perfect for you. It comes with an interest rate that starts from approximately 11% to 13% and the repayment period is a maximum of around 6 years. If you are planning to buy a new car, you must go for a new car loan which has a lower interest rate. They start from around 7% to 9% and have an extended repayment period of about 7 to 10 years.

Determinants Of Your Car Loan Eligibility

In order to be eligible for a loan, you need to have a good credit score. Lenders scrutinize your credit score to gauge your reliability in meeting loan payments. Abhay Bhutada, Poonawalla Fincorp’s MD says that the average credit score falls within the 500-600 mark. A range between 600-700 is considered good, while 700-800 falls under a very good category, and anything above 800 is considered excellent. In the case of car loans, anything above 750 is considered the perfect score. This gives you more favorable terms and interest rates.

Interest Rates And Additional Costs

Harsh Roongta, an investment advisor, recommends negotiating cash discounts on the down payment instead of a lower interest rate. This is because the interest rates may vary between lenders which is crucial to compare different offers. You also have charges like processing fees, documentation fees, or penalties for early repayment.

Navigating The Application Process

This part comes in a very later stage of your buying process as at this point you’ve finalized almost everything and now it is time to begin the application process. Many lenders nowadays offer both online and offline services and you can choose what to do as per your convenience.

You can apply online from your home environment making it a comfortable experience. But here, you must double-check the background of your lender as recommended by Abhay Bhutada. To start with, just make sure that your lender is registered with the RBI. You also need to look for customer reviews and feedback on the website. If you prefer offline methods, you must visit the lender’s branch with all the necessary documents.

Finalizing Your Loan

Once you’ve submitted your documents, the lender will review your application and determine whether you are eligible or not. If passed, you’ll be presented with the sanctioned amount, interest rate, monthly installment details, and repayment period. Read all the terms and conditions very carefully and then proceed to finalize the process.

Conclusion

Obtaining a car loan is a big time commitment and you need to be ready to manage all your other expenses around it responsibly. You need to be patient throughout this period and make decisions after considering every possible thing. With all the knowledge in front of you, be confident and go on this journey of buying your dream car.

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