In general terms, auto financing, also referred as car financing, car finance or auto finance, means the availability of a range of financial products that allow an individual to get a car without paying a full-cash single lump payment where Tips For Car Loan become vital to know.
- 1 How To Get A Car Loan?
How To Get A Car Loan?
Most people tend to make mistakes of not including the cost of auto financing while buying cars. This happens more with the people having a bad credit score, and they become excited to even get a loan. As a result, they do not enquire about the availability of lower rates. Auto dealers know this, and they encash this situation at the expense of the purchaser.
People choosing auto financing have a headache of hefty monthly payment to the financer. To reduce this cost, one has to be smart and diligent while buying a car loan. Here we have compiled a list of a few tips for car loan.
1. Know your Budget and Requirement
It is very important to know about your requirement while buying a car. I can afford a Lamborghini, but it does not mean that I should get it. I must know my requirement; having the required money and credit score does not mean that I should get it. Having said that, you must know what your actual needs are, do not go on the words of a dealership.
2. Always have Quotes from Different Lenders
If you have decided on the budget and requirement, then it is a time that you should know about the offers and rates offered by different lenders and Auto dealers. In most of the cases, a dealership will provide you with rates from multiple lenders based on your credit score. Evaluate all the offers and also search online for third party lenders. After all of this go for what best suits your needs.
3. Go for Short-term Loans
Dealership tends to offer long term loans as it gives them the opportunity to earn more interest. But you should know that it burns a hole in your pocket, always settle for what is optimum for you. Sales Reps always try to negotiate on the monthly payment, not on the actual price of a car. The reason beings is that they intend to show you lesser monthly payments by increasing the duration of your loan payment, not the price of your Car.
For instance, if you get a car loan of Rs. 5 Lakh at the rate of 8 % p.a. for a year then, you are required to pay the monthly EMI of Rs. 43,494, and in the end, you will pay a total of Rs. 5,21,931.
And, if in the scenario as mentioned above, term of the loan is changed to two years then, you are required to pay the monthly EMI of Rs. 22, 614, but at the end of two years, the total made payment is 5,42, 727.
Therefore, it is clear that the longer you take to repay a loan, the more interest you’ll pay.
You can use the loan calculator of HDFC Bank to see yourself what suits you best.
Read More: Ideas For Cutting Car Insurance Costs
4. Ask for Discount and Negotiate well
Many people tend to make the mistake of not negotiating. You must negotiate the price of the Car with dealers. They always have something to offer you. There is always a price difference in the sticker price and dealer’s price. If you negotiate well, you end up saving a few thousands on your car price.
5. Pay the Miscellaneous Expenses on your own
If you want to avoid huge loan payment and interest on it, then it is advisable to pay upfront from your pocket for various costs like registration fees, sales tax, documentation fee, and other extra things like extended warranties instead of financing them.
More often than not dealers are happy to roll all these costs into your auto financing as it gives them avenues to ensure more interest, but you should know that by doing so you are only increasing your burden and not decreasing the actual cost of a car.
6. Refinancing your Car Loan
Let us assume that you are already stuck with some bad car loan. Nothing to worry, we have the solution for this as well. You can always refinance your car loan like a mortgage provided that you must have a good credit score and your car is not too old.
There are several ways to get refinanced for your car loan like a local credit union, plenty of online lenders who are ready to get your car loan refinanced. It is always advisable that you check for all the terms and condition before refinancing your car loan and do not fall for a lower monthly payment on the extended duration of loan payment.
Key Points to take away from this Article
If you are looking for buying a new car on auto financing then always have quotes from different lenders, make a point to go for a shorter duration of the loan payment, do not try to finance all the cost associated with Car like documentation, sales tax etc.
If stuck with a bad car loan then try to get it refinanced. Know your credit score beforehand and search for a right dealership and at last, do not forget to negotiate.