A car is no longer a luxury but a necessity for many. If you want to purchase a car, it is easy to do so through a car loan. Since it is a secure loan, car loan interest rates are on the lower side and vary from 8.5 to 12 per cent. Car loan companies also offer you up to 100 per cent of the on-road price of a car. Also car loans are offered for a tenure of one to seven years, so you can choose a repayment tenure according to your needs. Here we look at the steps to get a car loan.
1. Compare car loan interest rates: The first step is compare car loan interest rates offered by different banks. There are many online loan aggregators that help you compare car loan interest rates across various banks. However, car loan interest rates also depend on factors like your credit score, your loan repayment capacity, your existing EMIs and so on. If you have a lower credit score, then you may have to pay a higher interest. You should also approach your existing bank to see if they have any pre-approved car loan offer for you. Since the bank already has your documents, they are in a position to approve your loan and give you an offer. Pre-approved loans also require minimal documentation and may also be offered at lower interest rates. When selecting a bank for a car loan, it is also important to look at other fees like processing charges and prepayment penalty.
2. Check your loan eligibility: Your loan eligibility will depend on factors like your income, your employment and so on. You can approach your bank to know your loan eligibility. Many banks also have eligibility calculators on their website where you are required to input certain details and the calculator shows you your loan eligibility.
3. Figure out the down payment: While car loans would offer you a loan for the on road price of the car, a higher down payment means lower EMIs. Also, if you are making a higher down payment, you may be eligible for a lower interest rate. Based on how much down payment you can make, finalise a car model based on your affordability.
4. Find out your EMI: This is an important part because the EMIs should be such that you can pay them without putting a strain on your finances. For this, you need to have a close look at your cash flow. Take into consideration existing EMI payments as well. Your EMI would depend on the loan amount, the interest rates and the loan tenure. To find out the EMI, you can use an online car loan EMI calculator. You need to put in the above details and the calculator will display your EMI and the total interest you need to pay. A longer tenure means a lower EMI, but more in terms interest payments. Remember that you should not stretch your budget for a car but go for EMIs you are comfortable paying.
5. Apply for the loan: Get your documents in place and apply for the loan. You can apply online from the bank’s website or by visiting your nearest bank branch. If your papers are in order the bank will approve and disburse your loan.