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Things to check before applying for a car loan

Buying a car is no longer a luxury all thanks to car loans which are provided by almost all banks and non-banking financial institutions. Owning a car makes your life comfortable and you can use it for commuting purposes rather than taking a crowded public transport.

Availing a car loan is now easy since you can apply for it online or by visiting the lender’s office. But before you get yourself a car loan, you must be aware of certain things before getting one.

What is the car loan interest rate?

Car loans have increasingly become popular because banks and financial institutions are offering competitive car loan interest rates. The interest rates offered by one bank may be less and more attractive than the other one. The interest rate offered by the lender is based on the loan amount, car model, credit score of the applicant, repayment capacity etc.

The amount of the loan

The bank decides the loan amount after checking your age, monthly income, credit score etc. So do not apply for a loan amount more than you need it. Before applying for a car loan, check for the car loan eligibility criteria.

Check your credit score

It is the most important criteria which every lender will check before your loan is approved. If your credit score is good, your loan will get approved in a shorter period of time. So before applying for a car loan, do check your credit score.

Loan affordability

Be sure about the loan amount you are applying for. Based on the loan amount, you can fix the tenure and also calculate the amount of EMIs you would have to pay for each month.

Make use of the EMI calculator available on the lender’s website and your EMIs are not more than 50% of your monthly income.

Tenure of the loan

Fix on the loan tenure during which you will have to repay the loan amount. Longer the tenure, higher will be the interest rate, the shorter the tenure, lower will be the interest rate.

While you can choose as per your preference, but it is preferable that you choose a minimum loan repayment term. Under a shorter tenure, you will have to pay higher EMIs, but your loan will get repaid faster. Thus you can save on the rate of interest.

Be aware of fees

Banks will charge you certain fees once your loan gets approved. The processing fee is the most common one which every lender charges. So check the fees charged by the lender before you apply for a car loan.

Prepayment charges   

You can prepay the entire loan amount when you have extra money. But certain banks charge prepayment fees along with other conditions before you can prepay. Hence apply for a car loan with a lender which charges low prepayment fee and has less number of conditions.

So check the car loans with the points and choose the one which suits you the best.