The saying “Knowledge is more powerful than money” makes sense when one has to find out the best car loan option that has the lowest interest rate and minimum processing fee. Thus we have jotted down a few essential questions that can help an individual save more on their car loan.
The first and foremost question that one should ask regarding a car loan is the rate of interest that is to be charged by the bank on the car loan scheme. There are various such banks and Non-banking financial companies that charge a lower rate of interest on car loans. Generally, borrowers who have an existing relationship with a bank can avail of a loan at a relatively lower rate of interest. Some banks and NBFCs offer loans at a rate of 9.5% per annum or even less.
Secondly, it is always advisable to pay around 20% of one’s car price on their own and further get the remaining amount financed by the bank or NBFC. However, there are many such banks that offer loans up to 100% of the ex-showroom price of the selected car. Applicants must try to follow up the 20% rule under which they should not take a loan which would eat up more than 20% of their monthly income in EMIs. Paying a comparatively higher amount every month can put a strain on one’s finances.
Even when the interest rate is low some lenders charge borrowers heavily for processing fees, documentation, prepayment, late charges, foreclosure, default in payment, etc. This ends up increasing the total amount that is to be paid for the car. The borrower should always check the final amount that he or she will be paying over the period by using the car loan EMI calculator. One should also check various other aspects such as the principal loan amount and tenure to get the lowest interest and save on one’s final car amount.
Applicants of car loans should also understand that their car loan would stay with them for some time and they will have to pay a regular amount in EMI every month for years. The key to a good car loan scheme is smart financial planning. Applicants should not agree to a higher EMI amount which may put immense financial pressure on their daily budget in order to keep the tenure on the lower side and save on the rate of interest. The borrowers should also refrain from choosing the longest tenure of loan because it will increase the interest payable on the loan amount. A balanced EMI with a sensible tenure that will not put excessive pressure on earnings should be chosen.
Some necessary documents will be required in order to pass the Car loan eligibility. In order to get a loan sanctioned one has to provide a range of documents to show the bank that he or she is eligible to repay the loan to the bank. Even though the credit score of the applicant illustrates his or her creditworthiness banks need more assurance and proof from the borrower that he or she is financially stable enough to pay off their debts with ease. To prove this, one has to provide a few documents that are listed below:
I. KYC documents for address proof, identity proof, and age proof.
II. Bank statement.
III. Income proof like Form 16 or latest salary slip, income tax return with a complete audit report of the last two financial years, etc.
IV. Business stability proof/ ownership proof.
V. Employment stability proof.
VI. Partnership deeds
A person who keeps all these documents ready at the time of applying for a car loan scheme gets his or her loan approved and an amount disbursed in a short period of time. Lastly, it is advisable to make use of a car loan emi calculator as and when required.
Also Read:- Understanding the Differences Between the Functioning of Car Loan and Personal Loan
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