What parameters should you consider while applying for a Car Loan?
Having a vehicle of your own has become a mandatory lifestyle necessity, as cities and towns continually develop leading to rise in jobs and occupations. People’s lifestyle choices either change or grow, public commutation may not always be accessible at your convenience.
To own a vehicle of your own, you would be looking at financing options, and there are many options in the market to finance new and used cars. But there are some key parameters you need to keep in mind before selecting your financing option.
Let’s take a closer look at these parameters:
1. Credit score
Credibility is a very important parameter to look at. In this case you are the borrower, banks and other financial institutions need to validate your credibility to grant you a loan or finance. Keeping a track of your credit score and making sure you have a score of 750 or above is important.
2. Loan tenure
Banks and financial institutions often choose a default tenure between 1 – 7 years for auto loans. However, in some cases these institutions extend the period to up to 10 years. Now that would seem like a good bargain on the surface, as you would be paying less monthly, but you might end up paying more than the actual borrowed amount.
3. Early repayment
There’s always an urge to be debt free, in order to achieve freedom we tend to pay off loans early. However, it is important to check with your bank or lender, about any pre-payment charges. In the event where you have already planned an early re-payment or a pre-payment, make sure to opt for a loan, which has minimal to zero pre-payment charges.
4. Auto loan charges
Aside from the interest on the loan there are other charges involved, these can be one time or yearly. Some of these charges include, vehicle registration or renewal charges, vehicle license charges, insurance charges. In some case your lender may offer to do take care of these on your behalf which may add up to the loan cost.
Upgrading your lifestyle or satisfying your needs is an important element of life. However, there are costs involved, making sure to beware and account for these costs is very important. Buying a new car or purchasing a used vehicle, both are financed via banks or lenders and costs might differ accordingly. Take your time do your research, decisions in haste often lead to pitfalls.