Many people today want to own a vehicle at some point in their life. In most cases, auto loans are the best way to buy a car. Cars have become more of an everyday necessity than a luxury these days. As long as you are careful, buying a car with finance is not a bad deal. There are many best car loan provider in India who are always up to help you guide through your auto loan decisions.
Today, around 1.4 billion cars are on the roads worldwide.
Cars are more than just transport. However, it can be very expensive to purchase your dream car. Many people use a loan to purchase their dream car.
A car loan will not only save you money, but it can also help you to have flexible payment options and many other features. Although it is now easy to obtain a car loan online, there are still some mistakes first-time applicants can make that could result in their loan application being rejected.
Many car buyers make mistakes with their auto loans that should not be repeated. Here are seven common mistakes you can avoid to ensure a smooth auto or car loan application.
7 Common Auto Loan Mistakes to Avoid:
1. Unknown CIBIL score
Many of us don’t know our CIBIL scores. This is a mistake as your credit score is indicative of how a bank or Car loan provider in Ahmedabad, India will treat you when you apply for a loan. The interest rates on car loans will go up if your credit score is lower than average. Many banks won’t lend to those with low credit scores. Hence, it is important to determine your CIBIL score and apply for a car loan after you have done some financial planning.
2. Not accounting for the total repayment amount
Not accounting for the total repayment amount is a common mistake with car loans that can be costly in the long run. When taking out a car loan, it’s important to consider the total cost of ownership, which includes not just the purchase price of the car, but also the interest rates & various other fees associated with it.
If you focus only on the monthly payment amount, you may end up with a loan that has a longer term, which means you’ll end up paying more in interest charges over time.
If you don’t account for other costs associated with owning a car, such as insurance, maintenance, and fuel costs, you may end up with a loan that is too expensive for your budget. This can lead to missed payments, late fees, and even repossession of the vehicle.
3. To pay small EMIs, take a longer loan
When you take a longer loan term, you are essentially spreading out the cost of the loan over a longer period, which can result in smaller monthly payments. However, the downside to this approach is that you’ll end up paying more interest charges over the life of the loan. This is because the longer you take to repay the loan, the more interest charges will accrue.
It’s generally recommended to choose the shortest loan term that you can afford, while still keeping your monthly payments within your budget. This can help you save money on interest charges and pay off the loan faster.
4. Choosing zero down payment
Many banks use zero down payment to get you to borrow more money. This means you will eventually have to pay higher interest. Although zero down payment options may seem appealing, they are one of the biggest mistakes you can make when getting an auto loan. It’s always a good idea to make the highest possible down payment. This will result in lower borrowing and therefore, lower interest.
5. Not checking the availability of pre-approval loan
One of the biggest mistakes that people make when taking out a car loan is not checking their pre-approval loan availability before shopping for a car. This mistake can lead to several problems, including wasted time, damaged credit scores, limited options, and missed savings.
Without knowing your pre-approval loan status, you may end up buying a car that is outside your budget, which can result in wasted time and disappointment. Applying for multiple loans without knowing your pre-approval status can also negatively impact your credit score, as each application results in a hard inquiry.
6. Rushing the Process
A common mistake when applying for a car loan is to hurry up in the process. It is important to take your time and contact several banks or financial institutions before deciding on the best offer. You may not get the best deal if you accept the first offer, often from the dealer bank. Remember that salesmen will always pressure you into making a decision. Take your time and think carefully before you make any decisions.
7. Not considering early pay-off penalties
Only a handful of Indian banks allow partial repayment or early repayment of an auto loan. In the event of early repayment, most banks will charge a penalty. If you sign up for a loan term of five years and decide to repay your loan in three years, the lender may impose a penalty to cover the loss in interest. This is one of the biggest mistakes in auto loans that you need to avoid.
It’s important to read the fine print of your loan agreement and understand the terms and conditions regarding early pay-off penalties. If you do decide to pay off your loan early, make sure you have the funds to do so and avoid any unnecessary fees or financial setbacks.
Before you apply for a car loan, always remember the above 7 points.
You will only be able to benefit from the financing scheme if you carefully consider the offer. Keep in mind the factors like loan term, car loan interest rates and future financial needs. It is worth spending the time and research to refinance or find a better loan.
At AGIL Finance, we offer the Best Car Loan Services in India.
So without any further giving a thought, speak to us at firstname.lastname@example.org now!