Planning to buy a car? Did you like a vehicle that is out of your budget? Well, that is no reason to feel disheartened. Banks and money lenders offer loans for purchasing your choice of vehicle, whether it is a two-wheeler, a four-wheeler or a truck. The good news is that there are a number of banks and money lenders who are willing to offer loans to individuals and companies to buy automobiles. But how do you know which of them is best for you? Here are a few tips that can help you make the right choice.
Check your credit rating
Your credit rating gets affected every time you take a loan. If you have already taken a loan, your credit rating would change. Check your score and determine if you are eligible for a loan and how much you can get based on your score. Visit Equifax, TransUnion and Experion websites to know your scores.
Compare interest rate
Every loan you get comes with a price, which is called interest. The interest rate on auto loans differs from one bank to another. To pay the lowest price, and get a good deal, you should compare the offers you have from different lenders. Just as you would shop around for a car, you should also shop around for a car loan. Even if it is just a .5 percent difference, the difference would be significant over the loan tenure. The interest rate you get also depends on your credit score.
Most of the car dealerships also offer finance for purchasing cars. In fact, getting a loan from the dealership is better as they may offer the loan at a lesser rate of interest. If they have a tie-up with a lender, you may even get the loan at 0% interest. But for that benefit, you should spend enough time on research.
Monthly installment
The monthly installment you pay comes straight out of your pocket and will be an obligation you cannot ignore. The EMI for your auto loan has to be paid on time if you want to continue using the car. Should you fail to pay the installment more than once, or in a row, the dealership or the lender could repossess the vehicle. So make sure that you adjust the tenure of the loan such that the installment that you need to pay every month or week is affordable.
If you cannot afford the installment, you will end up missing the payments which will also impact your credit score.
Avoid going overboard
Everyone has their dream car. But not everyone can afford what they want. It is a bad idea to buy a luxury vehicle when your budget only allows you a family car or a mini car. Even if you can afford the installment for a luxury car, it is a bad idea to go for it because to pay back the entire loan amount plus the interest could take a long time. Rather than going overboard by buying something you cannot afford, and getting stuck with obligation for years together, it is best to go for a budget car and be able to own the car in just a year or couple of year’s time.
Penalties
Banks earn money through interest. So when you plan to pay back the loan in advance, before the end of the tenure, they lose out a lot of income. That is why most banks charge a penalty on prepayments. So find out if the lender or bank you can choose to go with has any penalties for anything and make a choice that suits you best.