In today’s fast-paced world, owning a car has become a necessity.But not everyone has the funds to make an outright purchase. This is where car loans come in. Banks and lending agencies offer car loans for both new and used vehicles.
Although these loans involve interest and other costs, they allow you to buy your dream car without having to wait and save a corpus for its outright purchase. Taking a car loan is a good idea but you need to take certain precautions like checking the interest rates and other costs of doing so.
What are Car Loans?
Car loans from banks or other lending agencies allow you to buy a car of your choice wherein youhave to pay a small percentage of the total cost as the down payment to the dealer. The remaining amount is paid by the bank which you have to repay along with the interest on it via monthly instalments spread over the loan tenure. You can use a car finance calculator to check how much loan you can get and at what rates.
Here are certain things that you need to know about car finance:
- Getting a car loan involves certain charges like processing fees.
- You can get a car loan after you have paid a certain amount of the purchase price as the down payment. Most banks and lenders offer a loan amount equivalent to 80 to 90% of the car value with the rest to be paid by you.
- The interest on the car loan is the primary cost and the same gets added to your loan amount for the calculation of the EMI or the equated monthly instalment.
- Car loans are available for a period of up to 10 years. The longer the tenure of your loan more is the amount of the interest cost.
Why Go for Car Loans?
Trying to save money to buy a vehicle of your choice may take months or years. Car loans make it possible for you to buy your dream vehicle by paying only a small percentage of its total cost. You can check your car loan eligibility by vising a lender’s website for the requirements set out by them.
The major benefits of opting for a car loan are:
- You get to buy a car of your choice without having to pay the full price in one go. These loans are available on all types and models of cars.
- The process of getting a car loan is simple with only a few eligibility requirements and less documentation.
- You can pay the borrowed amount plus interest in equated monthly instalments which are easier to manage than paying a lump sum amount.
- You become financially disciplined so that you can make timely payments of the EMIs.
- You can negotiate for lower interest rates if you have a good credit score.
- You have the flexibility to choose the loan tenure according to your convenience. However, the longer the tenure the higher interest you will have to pay.
Car loans are quite useful as long as you take them for a limited tenure and restrict your cost of borrowing.