Today, owning an automobile has become a necessity. To fulfil this necessity, many lenders provide an auto loan. All of the lenders offer this facility to applicants at competitive interest rates due to high demand in the market. With the car loan, you can get your dream vehicle without worrying about the full amount’s payment. You can pay it all in small monthly EMI repayments. Most lenders offer up to 100% credit on purchasing a new vehicle based on the applicant’s eligibility. You can check your eligibility for the same on your lender’s website.
Do make sure to consider the cost of using a vehicle while checking whether you will be able to afford it or not. If you cannot afford four-wheeler expenses, you can purchase a bike or scooter and avail of a bike loan or scooter loan against it. Before opting for an automobile loan, you must know all the benefits that come with it.
Some of the most crucial benefits of an auto loan are explained below.
- EMI customization: An auto loan applicant can easily customize their EMI’s according to their needs after some negotiation with the provider. Paying a fair amount of money as a down payment can reduce monthly EMI’s that you will have to pay over the loan tenure.
- Easy eligibility: Due to the current economic scenario, the competition between the lenders has increased, which resulted in the benefit of customers. It has made sanctioning of loans easy as compared to previous years. Whoever fulfils the essential income criteria of the lenders can easily avail loans from them.
- Simple procedure: The scooter loan procedure has been made simple to attract more customers. The approval and documentation facilities take less than a day, and in some cases, on spot sanction of the loan is done. It is one of the many reasons why most people opt for a car loan.
- No need to provide collateral: In the case of an auto loan, the vehicle bought is treated as collateral, excluding any other security for the loan. In case of default, only your car is repossessed and not any other asset.
- Choose the repayment mode: Many lenders provide you with the flexibility to pay through post-dated cheques or through the auto-debit facility, where your monthly EMI’s will be deducted from your bank account.
Some do’s and don’ts of an auto loan.
Before applying for an auto loan with your lender, there are some things that you should keep in mind. Do go through the list below.
- Always compare loans offered by all the lenders in your city and choose the one that suits you the most. Compare interest rates, and check if they provide a fixed or floating rate of interest. Read all the terms and conditions and review for the hidden charges.
- Never borrow too much. By paying off a fair amount of money as a down payment, you can significantly reduce the loan amount, resulting in a lower interest amount. It makes it easy to pay your loan. A lower loan amount means lower EMI’s or a reduced loan period.
- To ensure that the lender approves your loan, you need to have a good credit score. By paying your existing bills and monthly EMI’s on time, you can improve your credit score. You can increase your score by paying your bills on time for at least six months in case of a low credit score.
Factors affecting your rate of interest
- Credit score: One can always negotiate with your lender if they have a high credit score for lower interest rates.
- Loan period: The tenure of a car loan affects the interest rate a lot. Generally, lenders charge a higher interest rate for a short period and a low-interest rate for a more extended period.
- Type of automobile: The interest rate of a car loan depends on the type of automobile you choose to buy. Car’s model and age also affect it.
Buying an automobile of your own, especially when you are at the start of your career, is expensive. If you purchase a vehicle with a loan, you can increase your credit score history by paying your monthly EMI’s on time, which also helps you in future loans. Unlike a bike or scooter loan, your liability on a car loan is higher due to a car’s higher price, so make sure to use an EMI calculator before applying for the loan.