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Your Guide to Finding the Right Car Loan

  • September 30, 2017
  • rootroot

Buying a new car is a major milestone that many of us work towards. Not only is it a very exciting prospect, it is also a mark of success, a sign that we are moving in the right direction. Now, most of us opt for financial assistance in the form of a car loan, and with the numerous options available today, finding a loan is not the hard part. This same variety can also get a bit confusing, especially if this is your first car loan.

However, with a little thought and a little preparation, you can avoid the common pitfalls and find the loan that suits you best. Instead of choosing the first loan that seems interesting enough, take the following factors into consideration:

Choosing the Right Car

Just because you like a car shouldn’t automatically make you buy it. It is vital to assess your need first.

While commuting by car is one of the most comfortable ways to travel, different people need cars for different reasons. If you need a car for travelling to your office every day, you will need a car that is easy to maneuver in traffic, easy to maintain, and frugal in fuel consumption. A high-end luxury car will probably not be the best option here. Alternatively, if you need a car for long distances, weekend trips and exploring new places, the functional capability of the car will take precedence over form. So, before you buy the car, you need to think about the ‘why’, which will help you decide upon the car you need.

Opting for a Pre-owned Car

Depending on your need and budgetary constraints, a pre-owned car might be a wiser option. Here are insights from IndianBlueBook which provide serious ‘food for thought’ in context of buying a pre-owned car: –

  • India’s used car market is valued at close to ₹1 lakh crore, and saw the sale of 3.6 million (or 36 lakh) units, up by 9% from 2016.
  • India’s pre-owned car market, at present, is 1.2 times that of the new car market
  • With the entry of OEMs* in the space, the used car market has become more structured, with systematic attention paid to the evaluation, repair, pre-sale and post-sale processes of used cars.
  • That is why more and more customers have started opting for well-maintained pre-owned cars as it is easier on the pocket.
  • Also, you would have to go for used car loans which differ from the usual car loans in a number of ways.

So, you will have to decide whether you want to keep the option of buying a pre-owned car into consideration, before you decide on the kind of loan you require.

*OEM – Original Equipment Manufacturer

Can you afford it?

Before you put your name on the dotted line, sit back and ponder whether you can handle the EMIs or not. As small as the EMI amount might seem at first glance, a car loan with a high interest rate and long tenure can take quite a toll on your finances. Take stock of your monthly expenses and then see how an EMI would fit in with them. It is also a good idea to pay off other ongoing EMIs first, before you take a car loan.

The Down Payment

A lot of financial institutions offer 0% down payment loans, but in the long run, it is better if you pay a certain amount as down payment. The down payment will otherwise be added to the principal amount of the loan, which means you’ll have to pay interest on it. That way, you would end up paying more within your loan tenure. Decide how much you can afford as down payment, and pay it upfront.

The Running Costs

Before you take a car loan and buy your car, you need to remember that buying a car does not simply end there. When you have a car, you will also need to maintain it. There will be servicing costs, insurance, maintenance, etc. Make sure that you can afford these charges as well before you buy the car.

Taking a car loan cannot be an ‘on the spur’ decision. It requires thoroughly weighing the pros and cons before you opt for it. For the sake of your finances and your peace of mind, make sure you give due consideration to it.

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