6 things you should consider for the best Car Loan

A car loan is the best way to finance your dream car, with the Reserve Bank of India data revealing that around 80% of cars and SUVs in India are financed through a car loan. Part of their popularity is due to the flexible repayment and loan tenure options they provide. Thanks to the many lenders offering car loans, buying a car for you and your family is not difficult anymore. If you’re looking to get a car loan yourself, here are some things to consider so that you get the best car loan.

1. Look for the best interest rate

With innumerable banks and financial institutions offering car loans, you are spoiled for choice. Interest rates on car loans range from 7.30 percent to 10 percent depending on the lending bank and other factors such as the car model, credit score, and repayment capability. If you are a bank account holder or an existing customer of a bank, you can first check with your bank, for it may have a special interest rate for its customers. It is advisable to do some research online about the existing car loan rates and compare them before choosing the lender.

IDFC FIRST Bank offers car loans, including pre-approved car loans, at the most competitive interest rates. For more details, you can click here.

2. Check your CIBIL score

Your eligibility for a car loan depends on your credit score, which demonstrates your creditworthiness. It is essential that you check your CIBIL score before submitting your car loan application. A credit score of 750 and above gives you a higher chance of approving a loan at a low interest rate. With a score below 750, you can still get a lender, but you will have to pay higher interest.

If you want to apply for online car loans, you can check and ensure that your credit score is good or excellent. To know your car loan eligibility at IDFC FIRST Bank, you can click here.

3. Check your eligibility and EMI affordability

Before considering a loan, you should know what the loan amount you’re eligible for. A bank may insist you to make maximum down payment, which may not be possible for you. Check the quoted price of the car, whether it is the on-road price or ex-showroom price.  You need to also check the loan-to-value (LTV) ratio, for not all lenders give you 100 percent finance. It is advisable to look for a loan at the on-road cost with a manageable down payment and lower interest rate.

Meanwhile, you need to ensure your repayment capacity by calculating your expenses to check if you can pay off the EMI easily. You can check your EMI affordability using the car loan calculator on the IDFC FIRST Bank website. Click here to calculate your car loan EMI.

4. Know the processing fee

Your car loan application is processed quickly, and for that, you are charged a processing fee. Most banks have different ways of calculating the processing fee. It may sometimes go up to ₹10,000, which is high. Before deciding on the lender, it is important to ensure the additional expenses you may have to incur. IDFC FIRST Bank offers car loans with zero processing fees, which saves a lot of money.

5. Understand car insurance

You need to have adequate insurance coverage for your car. When buying a car, some lenders insist that you accept an insurance policy as well. It is best that you do some research online for the best policy and coverage.

6. Know the foreclosure and prepayment charges

When looking for online car loans, check whether the bank charges its customers for prepayment or foreclosure charges. These charges apply when you make a prepayment of a part of the loan or pay off the loan before the tenure. In such a case, some banks may charge you a penalty. You may look for the no or minimal prepayment or foreclosure charges.

The points explained above can help you choose the best car loan of a new or preowned car. For preowned car loans from IDFC FIRST Bank, apply 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.