Auto financing with the help of a bank loan is preferred rather than paying a total amount in cash. It helps to cut financial burden and distribute it across oncoming two years. However, you will also need to pay the bank interest on the loan amount they approved. Today, getting car loans or personal loans is easy. The main thing to be familiar with is interest rates and charges. You can easily be trapped with their offers and marketing strategies, which accompany car loans.
Therefore, if you are considering a car loan for your purchase then spend time in analyzing interest rates related to long and short-term period and even a list of questions to ask the lender. This will help you make an educated financial decision.
Top questions to ask the lenders before opting a car loan
What interest rate will they charge?
Car loan interest rate is crucial because you will have to pay it every month. Getting to know the rate helps you to ensure that it is within your budget. If the car you prefer is above your budget then it will be hard to pay the loan. Generally, rate charged is fixed, so repayment is easy without any concerns about EMI increase in future.
How much down payment needs to be paid and for how long should auto loan be taken?
Majority of banks allow 80% loans on showroom car price. The remaining 20% has to be paid by the buyer. Larger down payment means lower the loan amount. Paying high EMI each month can strain your finances, so try to keep tenure on short term and save on interest. Refrain from opting for long term loan because it increases the payable interest on the loan amount. Balanced EMI with practical tenure, which will not burden your daily essentials has to be chosen.
What final price needs to be paid for the car?
Even with low interest rates, few lenders charge you heavily for documentation, borrowing, foreclosure, prepayment, default in payment, late charges, etc. therefore this will increase the overall amount to be paid. Borrower needs to check the final amount to be paid across a definite duration using an EMI calculator. Even check other aspects like tenure and principal loan amount to get low interest rate and save on final price.
What are the fees included in auto loans?
Besides interest, the borrower will need to pay several charges on car loans. Therefore, ask about the applicable fees and charges at the time of loan approval and during debt repayment. Some common fees and charges levied on borrowers are documentation charges, loan processing fees, registration certification collection charges, credit report charges, amortization schedule charges, stamp duty, loan cancellation charges, bounce charges, etc.
Are there any prepayment penalties involved?
It is an important question to ask the lenders. Many lenders levy prepayment penalties, when borrower desires to pay the total debt before deadline. Therefore, choose lenders that charge minimum or no foreclosure charges.
What documents are needed and how much time it takes for the loan approval process?
You will need to attach identity, address, bank statement, business stability, and income proof with your loan application. After submission expect to get an approval within one week.