Planning to buy a car? 4 things you need to check while taking a car loan
car loan products available in the market to avail of the most suitable one. Here are some key points to consider.
Credit score
To avail of favourable terms for a car loan, a good credit score is of prime importance.
One should check the credit score through a credit report from a credit rating agency. A good credit record of paying EMIs and credit card outstanding bills on time typically helps improve the credit score.
Interest rate and term of car loan
The higher the term of loan, the more the time one gets to repay.
One should also consider the interest rates levied by different lenders. A small difference in rate can make a significant impact on the total borrowing cost.
One should also check whether the monthly EMI in consideration is aligned with one’s budget and financial goals.
Flexibility
It is very important to check the provisions applicable for prepayment and pre-closure of the loan. Lenders usually levy charges/penalty for pre-closure of the loan.
A comparative study across various lenders helps to arrive at a suitable loan.
Need to buy a comprehensive car insurance
Lenders may want the buyer to purchase a comprehensive car insurance policy to be able to avail of the car loan. This insurance cost should also be factored in while taking the loan decision.
Content on this page is courtesy Centre for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.
