7 important questions to ask before taking a Car Loan

Applying for a car loan has become smoother and more hassle-free these days. Before you take the plunge, these are the eight key questions you need to ask

Buying a car is a significant milestone in a person’s life. It invokes feelings of pride, joy, and some serious excitement over finally having the freedom to hit the open road any time you want. In addition to figuring out things like your budget, which car to buy, where to buy it from, and what colour it should be, you also need to know how you will make the payment.

It’s not necessary to have the entire amount in your account before purchasing your automobile of choice. You can always take a car loan, which is easy to obtain online these days. However, you first need to ask yourself a few crucial questions that will help you choose the right lender and amount.

1. What interest rate will be charged for the car loan?

Since you are planning to borrow funds from a bank, the most pressing concern you should address is the car loan interest rate. While it varies from lender to lender, banks like IDFC FIRST Bank offer interest rates for a repurchase loan as low as 12.99% per annum with zero processing fees and verification waivers.

2. What is the total amount the bank can lend you?

Some banks offer loans up to 90% or even 100% of the vehicle’s ex-showroom price. However, as a rule of thumb, it’s advisable to finance around 20% of the total sum yourself and borrow the remaining from a bank. When deciding on the loan amount, ask yourself whether the EMIs after adding the car loan interest rate are feasible for you to pay. A used car loan interest rate and EMI calculator can help you with this. To know more about car loans offered by IDFC FIRST Bank, click here.

3. What’s the final price I will be required to pay for the car?

There’s more to a car loan than meets the eye. In addition to the principal and interest, you have to pay for other expenses like processing charges, documentation fees, prepayment, foreclosure, etc. Therefore, take these into consideration when calculating the final amount that will be going out of your pocket when the loan tenure comes to an end.

4. How long should the tenure of my car loan be?

According to financial experts, your car loan tenure should be as short as possible. This might feel a little counterintuitive because shorter tenures demand higher EMI amounts, but they also decrease interest rate costs. Therefore, you will ultimately pay less than you would on opting for longer tenure with lower EMI payments. There is also the benefit of paying off the loan sooner and freeing yourself of debt.

5. How much down payment should I make?

Ideally, the larger your down payment, the less debt you will have to borrow. This also results in reduced interest payments over time, thus saving you money in the long run. However, you need to wisely plan before committing a down payment that you can’t afford just to lower the interest rate.

6. Do banks charge a penalty for prepayment of loans?

Early payments might seem like a good idea, but some banks charge prepayment and foreclosure fees that may or may not be high. In such cases, opt for banks with the lowest or zero penalty charges.

7. What are the steps to apply for a car loan?

The process can vary from bank to bank. IDFC FIRST Bank has made applications really easy. All you need to do to avail of attractive car loan interest rates is give a missed call to 8448986445 and wait for a representative to contact you. The second and final step is to submit the requisite documents and get the loan sanctioned. As soon as you submit the post-sanction paperwork, you can drive away in your dream car! To know more about car loans offered by IDFC FIRST Bank, click here.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.