Long term Car Loan is not a good idea for buying a new car. Generally, the car loan is offered for 4-5 years, but many companies offer a seven-year loan for cars. Customers also take a longer-term loan due to low EMI burden. But buyers generally forget that the burden of interest increases for the long-term loan. Buyers also forget theta the vehicle also depreciates year-on-year and the car value also reduces in the long run.
Always keep the car loan terms shorter for better savings
As per experts, the lower loan duration for the car loan is always better. Some banks or financial institutions lend 80 per cent of the EX showroom price and some are willing to pay even 100 per cent on-road price for the car. While lending they charge a certain percentage of landing value as processing fee. So, the higher lending amount cost high processing fees for customers. It is advised to the customer to calculate all prospects before opting a loan from a bank or institution.
Always take Long Term Car Loan from reputed banks instead of NBFCs
While purchasing the car many customers do not give more attention to the loan paying bank of financial institutions. Often, dealers recommend non-banking financial institutions or banks with the dealer tie-up for lending. Generally, those banks loan interests are higher because they pay high commissions to dealers. It is advised the customer to compare dealers loan offering with other banks from the market. Whoever offers the best deal buyer should go with them? Dealers cannot force the customer to opt for lending from their network bank of NBFCs.
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Check very carefully how the bank is calculating EMIs
The buyer should also pay attention to the bank or institution calculates for their EMI calculations. Some banks or institutions give the option of fixed EMI and few offer alternatives to floating rates according to market conditions for interest rate revision. Customers should carefully choose the best option as per their financial condition while buying cars.
Understand the full details of interest rates applicable for your new purchase
Generally, dealers offer a lower rate of interest when banks offer high in their initial documents. Don’t de confused and considers dealers are best. Actually, the bank offer reducing the rate of interest which change based on market condition but dealers charge fix the rate of interest. Sometimes it’s beneficial but sometimes it’s very costly. We suggest buyers to always go with reputed banks for landing instead of dealers offering.
Carefully check the prepayment charge and detail while taking the loan
Most of the banks do not take any fees on repaying loan amount before time. Although some banks or financial institutions charge fees up to three per cent. It is also better to take this information before taking a loan. Banks want clients to give some part of the price of a product as a down payment. Whereas the dealer is ready for a loan on the whole.
