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Tips For Raising a Car Loan
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Indian economy is on rise and so is the sales of the Cars. The young salaried consumers in India want their wheels as soon they land up in a good job. The number of car loans is rising with the rising number of car sales. State Bank, HDFC Bank are leaders in this segment but the choices are many for the customer. Now when a customer walks into a showroom he has large number of options available to him. To decide on which Bank for the best car loan , the customer needs to compare various options of different banks. Some of the major ingredients for such a comparison are : 1. Rate of Interest What rate of interest will a Bank charge him. Naturally, the borrower will opt for the lowest rate of interest, if other terms and conditions are same. 2. Processing fee:- It’s a one time fee, but is a sizeable amount sometimes. Borrower should try to opt for a Bank which charges him lowest fee. 3. Prepayment Charges : Earlier, banks used to charge 2 to 5% as penalty for prepayment on all types of Car loans. However, now as per RBI guidelines, no penalty can be charged for car loans where borrower is paying floating rate of interest Thus, you need to check what is the penalty clause for pre-payments in case bank is offering you fixed rate of interest option. [In case any bank is still charging pre-payment charges on floating rate loans, please refer to following RBI circular http://rbidocs.rbi.org.in/rdocs/notification/PDFs/DBC070514DF.pdf ]
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Now the question is how much you can get? In case of customers who have a little to contribute as initial payment (what we call down payment), it becomes necessary to know as to how much bank will be ready to sanction you as a loan. Some of the factors on which the amount of loan depends are as follows:- (a) Car loans are given usually upto 85% of the car value and also based on your repayment capacity, i.e. your Income. So you can think to buy a Mercedes but your monthly income should be accordingly to give monthly EMI . Hence, based on above two you know how much you can get for your car loan.
Now is the question- Should you take what maximum loan amount you can get or something else? Ads by Google One needs to understand that the Car is a depreciating asset, so taking a bigger loan isn’t a good idea. As bigger is your car, the charges to maintain it and fuel cost will rise and even the Insurance cost. Going through past data , we feel customers who have taken car loan where EMI is equal to or less than 20% of their monthly income that’s suited best to an individual. Supposedly, if you earn 20,000 a month your car loan EMI shouldn’t be more than 4000.So taking a small car is a good idea rather than going in for higher Car loan emi of 8000-10000 for same income. Its easy to take a Car loan but to enjoy the Car and the Car loan, one should maintain a ratio of 20%. All those customers who want to take a home loan in near future should remember this more as at that point their Home loan eligibility will decrease if they have any other bigger EMI..
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