Tips on how to manage your car loan

A car has become a necessity rather than a luxury for the modern Indian upper-middle-class family. In some families, each member of the family has a car at their disposal. With this growing trend car loans (CL) has become very common in an Indian household.When we avail a car loan one should keep the following points in mind before and after taking the loan.

Buy within your budget: Your dream car may be the may be an expensive one; however, think twice before you go for it. Can you afford this car? Take into consideration your monthly expenses, obligations, investments etc. before you go to the car. Take a car loan EMI calculator to know your monthly obligation towards it. Buy your budget to make sure that your dream car does not become a nightmare.

Pay the maximum amount of down payment: When you check your car loan eligibility you might be entitled to a higher amount of loan which you may not actually require. Do not completely exhaust your eligibility; utilize your free cash flow to pay the maximum down payment. This would tremendously reduce the burden of EMI burden bundled up over your head. A lower EMI would mean lesser interest cost paid by you over the tenure of the loan.

Shorter the tenure the better: You might be eligible for a slightly higher amount of loan if you opt for a longer tenure. However, do not be tempted by it, try to squeeze in your EMI in the shortest tenure possible. This might mean a higher monthly EMI obligation nonetheless it will reduce your annual interest cost.

Compare interest rate running in the market: Almost all banks and financial institutions offer car loan in India. A new car loan interest rate in India is presently hovering around 9.00%. It is advisable to compare car loan interest rates on any online portal before you pick up one.  Remember the lower the interest rate, lighter would be the interest burden.

Do not default on your EMI: Make a monthly/annual budget and stick to it. Manage your expenses in such a way to make sure that you pay your EMI regularly. Do not miss on any one of them. If you slip on paying a couple of them your bank will declare you as a defaulter and may confiscate your car too. Further, your credit score will deplete and none of the financial institutions might not want to lend you for any purpose.

Consider Refinancing: If you’re not been able to pay your EMI timely then you could negotiate with your or any other bank / financial institution for a more favorable interest rate and tenure which you can obligate timely. This is basically taking the same outstanding loan on better terms and conditions which you think you can fulfill.

Compare car loans online not only for the interest rates but also the other terms and conditions such as processing fees, pre-payment charges and foreclosure charges and they do too make a marked difference in the ultimate cost of the car loan.