Best Car Loans

What is car loan?

As the name suggests, car loan is a sum of money borrowed for the purchase of a four-wheeler. Also to be noted that, the sum borrowed can be used only for the purchase of a car and not for any other reason. While signing the loan application, the applicant agrees to pay the borrowed sum to the lender along with the calculated interest. Such loans are also termed as secured loan, where the intended vehicle serves as the collateral.

Having a car ride is definitely fun and exciting. Almost everyone loves going on a long drive with no worries of life. But the sad part is that most people have to give up on their desires as they don’t have enough sources to bring home their favourite car. However, the days are gone long back when buying a four-wheeler was counted as something luxurious. Today, the financial market is flooded with plenty of car loan schemes at competitive interest rates with flexible terms, which makes it easy and affordable to bring home your favourite vehicle. Hence, despite being one of the most expensive commodities, it is now quite affordable to buy a car at easy monthly instalments.

Checklist to Follow While Applying for Car Loan In India

Benefits of car loan:

Gone are the days when one has to shell out loads of money for the purchase of a new car. Now the financial market is quite active and one can easily avail best car loan in India. This loan is a popular financing tool for owning a favourite four-wheeler. Apart from this, there are other benefits too of a car loan online. Let’s check out them in a quick glimpse.

Wider eligibility – As the competition in the market is increasing, the dealers are offering wider eligibility terms among the customers from all walk of life. This makes it affordable for anyone meeting the basic minimum income criteria to avail a loan from prominent banks and financial institutions.

Easy processing – Also, the loan application process is quite easy and hassle-free. In order to woo maximum number of customers, several lenders have introduced the service on the digital platform as well. Overall, the documentation and approval process takes less than 72 hours of time. With online car loan application, the applicant can apply for the loan at the comfort of their home and office.

Lower money margin – Generally, the banks offer finance facility up to 95% of the on-road car price which lowers the financial burden of additional expenses such as accessories, insurance, and vehicle registration. This makes it possible for even a middle-class individual to purchase the vehicle with minimum funds available.

Collateral security – Car loan is termed as the secured loan where the vehicle itself acts as the collateral eliminating the need of providing additional security against the loan.

Boosts CIBIL score – Another benefit of opting for a car loan is that regular and timely loan payments boosts the borrowers’ credit score, which ultimately makes them eligible for the exciting loan offers in the near future. The banks and financial institutions keep a close eye on the individuals having CIBIL score above 700 and propose loan offers at competitive interest rates.

Flexible EMIs – This is another factor in the benefit list. As every borrower falls under different income bar, one has got the freedom to opt for flexible EMI options that suits best to their income and budget. However, it is best to opt for a shorter tenure otherwise the borrower has to pay huge amount as the loan interest.

Things to keep in mind while hunting for best car loan in India:

As there is an exhaustive market of both new and second-hand cars waiting to be driven out of the showrooms. As the competition is higher among the vendors and people are excited to drive home their favourite car, there are certain things they skip to keep in mind. So, let’s take a closer look at some of the concerns that most people overlook.

Be serious – First of all, while stepping into a car showroom, remember that you’re not here just for a casual shopping. Showing genuine interest for the purchase encourages the salesperson to attend the customer with due diligent. Know their offers and terms and try negotiating according to your needs and budget and the rest is up to the deal to convince you to make a final purchase.

Leverage internal competition – Though the ex-showroom price of the car remains same with almost every dealer in the city, but there’s also an internal competition among the dealers and each of them is trying to get the customer to increase their sales. So, let the dealer know that you are hunting for other dealers too; this way you can zero down the offer at lowest EMI on car loan.

Use your bargaining skills – You’ll be surprised to know the variations on final price of a car. Thus, make sure to best use of your bargaining skills while dealing with the dealers.

Schedule it right – While signing in to car loan, the biggest challenge is to get the lowest interest rate with flexible terms. So, if you are hunting for ways to negotiate the best rate of interest, then avoid walking into a showroom during the first fortnight of the month. This is because the dealers work on targets, and thus, walking-in during the second half of the month can get you better financing terms.

Car Loan Default

Whenever you sign a car loan agreement, it simply means that you legally agree to make timely repayments for a given tenure. However, there comes time when situations are not the same as expected, resulting in car loan default. Whether it’s a job loss, accounting error, or even divorce, the lender is only concerned about their payments and not with the borrower’s personal issues.

When you default loan payments, it not only damages your credit score, but could also make you lose your car. However, the default can occur right after a missed payment or months later, subject to your loan terms and agreement.

Technically, a loan default happens when a borrower repeatedly fails to make timely loan repayments on the agreed terms to the lender. Usually, lenders have prescribed number of payment failures resulting in default is specifically mentioned on the agreement. Moreover, everything about the loan term and defaults are explained in details. Therefore, it is said to read and understand the agreement thoroughly before signing on the dotted lines. This would help you protect from the last minute surprises.

Credit score dips – Even a single missed payment can result in a credit score dip. However, the lender will notify you about the due dates or missed payments via email, SMS, and call, and typically provides a short period of time to make the payment or resolve the issue. Not doing so, could result in credit score drop.

Debt goes to collections – As aforementioned, the lender notifies a borrower about the missed payments, and if the payments are not made even after 30 days, the debt goes to collections. Once the debt goes to collections, your credit score will dip even more and you’ll be also pressurized by the collection agencies to make the payments as soon as possible. This will trigger both mental as well as financial anxiety.

Negotiate with the lender – If you’re not responding to the collection agencies’ attempt to contact you, the probably wouldn’t send any notice or alert before seizing your car. So, before such things happens, it better to get in touch with the lender to quickly negotiate on the due amount and resolve the issue. Even if you agree to make a portion of the payments due, the lender would rather prefer to settle the account than repossessing your car.

Asset seizure – If you failed to even to settle the due payments, your asset (car) will be ultimately seized. Although, the good news is even if a lender seizes your car, you have a short period of time to arrange the due payments and reclaim the asset.

Bottom Line

Car loan is definitely an easy way to bring home your favourite vehicle home, but that comes with great financial responsibility as well. Thus, it is important to get the loan at the right time and with the thorough research, of course. You should know exactly how much amount you’ll be repaying along with the calculated interest and see if you are okay with the remaining monthly budget after deducting regular EMIs out of it. Going with the strategic and well-calculated financial planning can get you on a long way, but one wrong decision can land you in spiral of debt. Hence, be sure of your finances and budget before opting for a car financing scheme.