Four-wheelers are a vehicle for many, but a passion for some while it is a necessity for many others. Cars are considered a significant investment for many of us after real estates. Buying vehicles is exciting and needs many efforts like researching for finding the best vehicle within your budget, financing options to consider, the add-ons for your car, etc. Of all the steps one puts, financing the vehicle is very important.
Vehicles are always expensive, so being aware of factors to find the right car loan is essential. You need to select the right lender, be mindful of the terms and conditions, as these saves aplenty. The other factors to consider before applying for one are:
Check the credit score
The credit score and FOIR are the two calculations that lenders emphasise before approving the car finance. Both the calculations determine the creditworthiness of the consumer. The credit score is the ratings provided by the credit bureaus, which depicts your past financial behaviour. Lenders generally check the credit score to see if you disciplined with your previous loan payments.
The Fixed Obligation Income Ratio is your present liabilities along with the applied loan. If all the total payable dues are more than 50% of your net income, the lender does not grant the loan. You need to be an informed borrower and check both the CIBIL and FOIR scores.
Compare loan options
You can get four-wheeler loans from two sources: the banks or other financial institutes or the dealer directly. Both have their advantages and disadvantages. Moreover, if you opt for a bank, you need to select a reputed bank for the loan. Like a personal loan, the interest rates and the terms differ from lender to lender. Comparing the options makes sure you save considerably in the total outgo of the loan.
Lengthy loan tenure
Longer loan tenure might sound sometimes appealing, as the monthly outgo is smaller. But do not forget that cars are depreciating assets. The vehicle value, especially the new ones, decline sooner. So, keeping longer tenure hurts in different ways. The cost of borrowing gets high due to the four-wheeler loan interest rates. Also, by the time you end up paying the EMIs, the vehicle value depreciates massively in the market.
Making down payment
The loan down payment helps to reduce the overall car loan finance costs. The offers like zero down payment might sound enticing, but if you flip the coin and check the other side, you realise these are marketing gimmicks. Not making down payments never helps. You might need to pay a high amount at a later stage. Make a bigger down payment and enjoy a better price on your vehicle.
Financing of add-ons
Your car requires multiple add-ons such as parking sensors, body cover, music system, seat cover, etc. Taking up all the expenses of the add-ons might get tedious. Some lenders provide financing of add-ons when you apply for car loan.