The prospect of owning your first car may be an exciting proposition, but you should consider the monthly fuel expenditure along with EMI’s (Equated Monthly Installments) that will eat into your fixed monthly income, especially when you’re trying to apply for a car loan.
By all means, you should try to reduce the car loan as much as possible in order to reduce your car loan EMI.
Here are some tips to get the best can finance deal in India…
Negotiate with Car Dealership
No matter which car you want to buy, the size of your car loan always depends on the price of your car.
If you try to bring the car price down, the size of your car finance goes down as well.
But, as a matter of fact, many car buyers don’t really negotiate and ready to pay the sticker price of the car. This is where the problem lies.
Present yourself a strong potential buyer to the car dealership and negotiate for a discount. For example, you can tell them names of some other dealerships who are offering you a better can finance deal.
If you’re working for a company, you can also get a corporate discount on your car as well.
Either way, you can bring the price down through negotiation.
Moreover, the car dealership will always try to upsell other car accessories to you, which will inflate the cost of the car. Don’t fall for that – rather, choose the accessories which add value to you immediately. You can always go for more accessories when you really need them down the road.
Why pay EMI on car accessories that are not really necessary!
Shop Around for Cheapest Car Finance Deal
Simply put, a best car finance deal is one which offers the lowest interest on your car loan. However, the fact is the cheapest auto finance deal isn’t going to just come walk up to you. Rather, you need to look for it yourself, by shopping around several options.
From nationalized banks to private banks to NBFC’s, there are several options to apply for a car loan.
The car dealership usually have a tie-up with banks or NBFC’s. They will tell you you’re getting the cheapest auto finance deal with them or the documentation process with other lenders are cumbersome. It’s because they are going to get a fat commission on every car they sell.
So, it is your responsibility to check with several options and go with the one that suits your requirements.
Prefer Car Loans with Shorter Tenure
Car is a non-appreciating asset and it doesn’t even have a tax break either.
Paying interest on a car loan for a longer period, therefore, doesn’t make any sense at all. Opting for a long tenure means you’re ready to pay more interest on your auto loan.
This is exactly why your focus should be to pay off the loan as soon as you can. In other words, you should choose a car loan with shortest tenure and lowest interest.
Again this is something you need to shop around for, as every lender will try to serve their interests.
Read the Fine Print
When you’re taking a car finance, you should educate yourself about certain things that may affect you down the road.
For example, you should find out about the prepayment option with your car finance deal. When you prepay a car loan, you basically pay off the loan in order to avoid interest. However, the lender usually levies a Prepayment Penalty for this.
Similarly, there are can finance products which come with a variable interest rate, meaning your EMI will vary depending on the market rate of interest which may fluctuate in future. It’s not recommended to choose such an option for a car loan.
Then there are lenders who offer a bundled insurance, meaning the insurance will be a part of your auto finance. Try to understand if this will affect your EMI or interest rate before singing along the dotted line.
Negotiate the Interest Rate and Fees
Negotiating for the lowest interest rate or waiver of car loan processing fee is a great way to reduce the overall cost of your car loan. While most lenders will shy away from negotiation on short-term loans such as car loans, you still have a chance to negotiate the interest rate and fee waiver if you have a great credit score.
Check Your Credit Score
Did you know 78% of the loans approved are for individuals with a greater credit score than 750?
Credit card is basically a score that suggest your creditworthiness or ability to pay off a loan quickly.
The CIBIL or Credit Information Bureau (India) Limited is an agency that tells you your credit score upon paying a subscription fee. In fact, this is what your potential lenders will check before approving your loan application.
Sometimes, you can improve your score by simply paying off an outstanding loan or requesting the agency to rectify any incorrect data about you.
Therefore, this is the first thing you should do before applying for a car loan.
Car is a non-appreciating asset; hence, you should try your best to reduce the size of your car loan in order to keep the interest as low as possible. With the above car loan tips, you can possibly keep your car loan from driving you nuts.