Avoid These Common Car Loan Mistakes

We all have that one friend or family member who is passionate about cars. Not only that, they are aware of every new vehicle that is launched or is going to be launched in the market. They are your go-to person to make a choice when it comes to buying a new car. But one thing they are not aware of is about the finances for your new car. So read through this article to know what you should avoid while availing a car loan

Of all other things that are confusing while buying a new car, the most difficult is getting the right car finance for your new vehicle. Buying a car is expensive and so are your mistakes that may punch a hole in your pocket. Being unaware about the essential terms and conditions or selecting a wrong financing partner can be regretful.

Let us look at the common car loan mistakes-

Not Comparing Among The Financers

There are two ways from how you can avail finances for your car, one being directly from your dealer and other a financial institution. There are pros as well as cons to both the options. If you opt for car finance from a bank, you need to compare the various interest rates and tenures that are available. These components vary among different lenders, and everyone wants a loan at a lower interest rate. Making a thorough comparison can help you save a considerable sum.

Checking One’s Credit Score And Fixed Obligation To Income Ratio

While a lender offers a loan, the first two calculations they make are about the credit score and fixed obligation to income ratio (FOIR). These calculations help in evaluating the creditworthiness of the customer. A credit score often calculated using CIBIL, is a measure depicted by the Credit Information Bureau (India) Limited which provides the past credit behaviour in terms of repayments of a person. FOIR, on the other hand, is calculated using the income against your present liabilities. If the obligations add up to more than half your income, the lender may not grant a car loan.

Not Making Any Downpayment

Making adequate downpayment helps in minimizing the amount of borrowings. When you seek a car loan, ‘zero downpayment‘ offers seem attractive, but you eventually end up paying interest on a larger amount. They are just marketing strategies to attract more customers. It does not help in saving money, and instead, you pay more than you ideally would have.

Availing Finances For Accessories

These days car manufacturers load the car with a few basic features and most others are left as optional. You might want to add features like a parking sensor, body cover, seat cover, music system and more to have an enjoyable experience. Adding up all these add-on accessories in your vehicle loan amount may not be a wise choice. Instead, they can be bought as aftermarket spares or later on saving up for them. Paying a higher interest rate as your car loan is not worth it.

All good things come to those who wait; but when you get a car loan, make sure you wait for the best deal and avoid these common mistakes. While you wait, you can also check out car loan online and compare before buying one.