Are you searching for the right car loan? Buying a car is the second biggest investment of your lifetime after buying a home. And, there is a big probability that you may buy more than one car in your lifetime. Buying a car does not only mean picking the perfect vehicle but also getting the best available car loan. Lack of knowledge about the hidden charges and processing fee can land you in trouble. Therefore, opting for a car loan requires a serious and careful research so that you are saved from any fraud. Here are three mistakes to avoid before taking a car loan:
Not doing enough homework around car loan
The golden rule before taking a car loan is doing enough homework and window shopping around different loan products. Tracking down a reasonable and affordable loan with a genuine lender is equally important as cracking down a perfect vehicle. Many buyers do a good amount of research before buying a car but they don’t do much research around the right financing option. Also, some buyers blindly believe the dealer financing and take a loan from them. This practice is highly damaging. You should always check the facilities provided by multiple lenders and close the deal with the one that offers the best product and the best car loan interest rate. You should not focus completely on EMIs as many lenders will demand less EMI amount but their tenure will be comparatively longer. A long tenure loan will end up in paying a substantial amount of extra interest. According to Mr. Kumar, who recently financed his car through Tata Capital, “And the best part with Tata Capital was the quick disbursal of my loan amount and hassle free process. The required documents were minimal and easy to arrange. The documents required for applying a used car loan include ID proof, address proof, signature verification proof, photograph, ITR/salary slips, Form 16, and bank statement for last three months.”
Selecting no down payment schemes
If you easily get attracted by the zero down payment and no down payment advertisements, there are fair chances that may land you in further trouble. Though this scheme may lure the potential car buyers, in reality, it’s just a marketing gimmick. This is something like ‘less now and more later’ scheme. As you will be required to pay more on future EMIs, the interest outflow will be more causing a heavy financial burden on your lifestyle. Moreover, buyers often miscalculate the implied cost as they don’t ask clearly about other hidden charges, like processing fee and taxes. Also, while many financial institutions offer a longer tenure loan, it is not advisable to take a loan of more than 60 months. A longer tenure car loan is a financial risk. Not only you will be paying the maintenance charges of your car but you will end up in paying a big chunk of money as car loan interest. With proper planning, this can surely be avoided.
Financing of ad ons
Another common mistake is investing too much in not so required add ons. While they may appear stylish and tempting, most of them are unnecessary and will be never used in the car. They will just occupy space and get them financed implies that your loan amount will rise further, causing either increased EMIs or loan tenure. According to -Rishi Mehra, Co- founder, deals4loans.com, “Negotiate the car price – It is often overlooked, but the best way to bring down the cost of a loan is to negotiate the price of a car. Dealers have a sizeable margin on every new car sales and you would do well to get some discount. Approach multiple dealers for your car and check out the offers and discounts available. In the end, if the total price of your car comes down, the amount needed as a loan would also drop.”
A little planning and proper research beforehand can save you from paying a large sum of money as car loan interest and other unwanted expenses. You can do a lot of research on the internet from the comfort of your home or office.