Common Mistakes To Avoid While Applying For A Car Loan

Fundings for buying car, bike or even scooter are easily available these days through vehicle loans. Buyers often make hasty decisions while taking loans. Especially the first time buyers, fail to consider the elements required to secure a favourable loan agreement.

Here are some common mistakes to avoid while opting for an auto loan:

Over-Stretching Budget

First thing to consider is your budget and evaluating your repayment capabilities. It is natural to be tempted to spend more than what you can afford in the long run. Keep in mind that the monthly instalment (EMIs) will increase with the increasing loan amount. Interest paid will also be higher on huge amount.

Not Checking Credit Score

You can negotiate on interest rate, if you know your credit score in advance. If your credit score is high, you will be in a better position to negotiate for a lower interest rate or attractive offers. Any loan application must be accompanied by a credit check. If you need any help in understanding how credits work or how to plan your budget for loan, SavenGrow is there to guide you.

Repayment Tenure

People don’t usually do their research and choose repayment options as what suits and benefits them. Some may prefer spending less on EMIs and are okay with paying for a longer period of time. Whereas, some people prefer repaying as soon as possible which would result them in low interest rates but higher EMI amount. It totally depends on your situation, earning and expenditures. For instance, . A loan repayment tenure of 7 years at a 10% interest rate will result in a monthly EMI of around Rs 8,300 for a Rs 5 lakh vehicle loan. The EMI will be Rs 16,133 if the loan term is 3 years with the same interest rate, and will be Rs 697,200 over and above the Rs 5 lakh loan amount. Alternatively, if the loan term is 7 years with the same interest rate, you will pay Rs 697,200. This will result in a total payment of Rs 5,80,788 – effectively reducing the interest portion to Rs 80,788.

Selecting No Down Payment Plan

There is nothing more tempting than driving your dream car out of the showroom without making a single payment. In addition to paying more on EMIs, a zero down payment means you’ll pay more in interest. The hidden costs involved in this equation are often overlooked. The down payment should be at least 15-20% of the actual cost, and the rest should be financed.

Make sure you do your research about the car, its price, features, and the amount you will need to borrow before making a choice. With years of experience and knowledge, SavenGrow is here to help you choose the perfect loan plan according to your needs and requirements. SavenGrow will also help you throughout your loan process, and will help you make right decisions regarding how much you can borrow to repay the lender comfortably according to your monthly income. Divide the cash in hand among multiple expenses based on your down payment. Moreover, read the loan terms and conditions and clarify any doubts you may have with the lender, as this will ensure a smooth and trouble-free loan application experience.

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