The easy availability of car loans has ensured that a large percentage of people can buy a vehicle. These loans have made car purchases affordable since the buyer does not have to pay the full price in one go. Instead, the purchase is funded by the lender who distributes the total cost of the vehicle plus the interest on the loan into monthly EMIs or equated monthly instalments.
While it is easy to pay monthly instalments than making an outright purchase, the tenure of the car loan should be chosen carefully keeping in mind the applicable interest rates. Here we talk about certain tips that will help you manage your car finance effectively.
Managing Auto Loan
Taking a loan has become quite easy if you have a regular income and the capacity to repay it. But to ensure that you can easily repay the car EMIs, you need to act wisely and make decisions that help you manage the auto loan efficiently. Here are some tips to do so
Ensure that your car loan is not burdensome and difficult to repay. Since the amount of loan is dependent on the total price of the selected vehicle and the down payment for it, it is better that you negotiate well in advance. If you are successful in getting a good deal for your car, the loan amount will automatically come down. The failure to repay the EMIs can hurt your credit score and restrict your ability to borrow in the future. So, plan out your expenses in such a way that you can easily pay the EMI.
Higher Down Payment
Although you can get a car loan for over 90% of the purchase price, it is prudent to make a big down payment and reduce the loan amount. The lower the borrowings lower are the EMIs that you have to pay.
Compare the Loan Terms
It is always advisable to compare the car loan offerings from different lenders for the terms and conditions attached to them. Compare the loan processing fees and other applicable charges on the loan amount and choose the one that is most convenient and reasonable. This will again ensure that your borrowing costs remain low.
Look for Dealer Tie-ups with Lenders
Most car vendors or dealers already have tie-ups with banks and lending agencies for offering car loans on vehicles sold by them. This not only reduces the processing time but also ensures that you get the best deal.
Choose a Shorter Tenure
The longer is the tenure of your car loan more is the interest that you pay on it. To reduce the interest costs, go for a loan tenure that you can easily manage. You can use a car loan eligibility calculator to check how much loan you can get and for what duration.
The best way to manage your car loan is to:
- borrow only what you can pay
- Be disciplined in paying your EMIs
- Switch your loan to a lower interest option if available
- Prepay the borrowings whenever you have extra funds
- Talk to the lender if you are facing some difficulty in paying the EMI.
These tips will certainly help you manage your car finance well.