You have spent several months researching different vehicle models and brands to find the best one for you and your family. You’re so happy to be able to buy your dream car finally. You find the dealer closest to you, take the car for a road test, and are now ready to buy a car.
The dealer offers you a car loan from a lender they work with. You don’t think about it twice and sign the contract. Stay put! You’re making a huge mistake. Most car dealers work with companies that offer auto loans to save their customers time and paperwork.
Even though it’s easy to get, that doesn’t mean it’s your best deal. You’ve probably heard the saying; There’s nothing like a free lunch in business. The same goes for this case. Car dealers get paid based on how many loans they help people get.
So, they are eager to give you a loan offer that looks good. Even better, they give you discounts on car accessories to sweeten the deal. As a result, most buyers make the mistake of agreeing to the loan deal the car dealer offers without looking into other options.
Remember that getting a higher interest rate with a car loan will take longer to pay back and make the loan more expensive overall. We strongly suggest that people who want to buy a car do their research to find the best car loan deal.
How to find the best car loan value?
Getting a car loan can be scary and hard to understand, especially if you’ve never owned a car. Don’t worry. CreditMantri will help you out. Here are the six easy steps you need to take to get the best deal on an auto loan.
Choose your dream car’s model and brand.
Do you have a model in mind that you want to use? After that, you can skip this step and move on to the next. Finding the right car for you and your family takes time and research. Start by deciding what kind of car your family needs: a small hatchback, a luxurious sedan, a sporty SUV, or a practical cross MUV. Next, make sure your budget is set. Instead of deciding on a single number, decide on a minimum and maximum.
This gives you a lot of options from which to choose. Finally, it’s time to look at the models that meet your criteria and decide which ones are best. YouTube has a lot of helpful videos with car reviews that can help you in your search. Make sure to drive the car before you decide to buy it. Once you’ve chosen the make, model, and style, it’s time to start the car loan process.
Compare the interest rates to find the right lender.
The interest rate is one of the most important factors in figuring out the total cost of a loan. The best thing to do is to look for a lender with the lowest interest rate. But remember that there are other things to consider besides the interest rate. Before choosing a lender, you should look at the processing fees, the lender’s reputation, any prepayment penalties, and any other fees. Use these criteria to evaluate lenders and make a short list of the ones you like best.
Check if you are eligible.
Lending institutions have varying eligibility criteria. So, make sure you meet the requirements of the lender you want to work with. Most lenders generally give car loans for up to six times the applicant’s annual income. Lenders also have other requirements based on where the borrower lives, their credit score and credit history, the borrower’s job, etc.
Most lenders have an eligibility calculator on their websites so that people who want to borrow money can quickly find out if they are eligible. You can also talk to the lender’s customer service team to determine if you are eligible for a car loan.
Working Out the Details: Loan Amount, Term, and EMI
Before you go to the lender, you need to figure out some details about the loan. How much do you need? How much of an EMI can you pay each month? Remember that the EMI goes down as the loan term increases, and vice versa.
Again, you can figure out this with a free online car loan EMI calculator. Put in the loan amount, the interest rate, and the length of time to find the EMI. Change the numbers until you find an EMI that works with your budget. Also, you might have to make a down payment. Most lenders won’t approve 100% of the on-road price of a car.
The most you can borrow is between 80 and 90% of the car’s cost. If your lender wants a deposit, you must save up for it. Most people use their money from selling their old car as a down payment on their new one. If you don’t want to save up for the down payment, you can talk to car loan lenders that offer 100% financing.
You can apply for an auto loan online or at the branch of your lender closest to you. Fill out the application form and send in the documents that are needed. Different lenders have different lists of documents. Here is a list of available documents that can help you:
- Proof of identity, like an Aadhaar card, a driver’s license, a voter ID, a PAN card, a passport, etc.
- Proof of address: Aadhaar card, ration card, passport, voter’s ID, telephone bill, EB bill, insurance copy, etc.
- Income proof
- Form 16 and the most recent pay stub for salaried people
- For self-employed professionals and business owners: bank statements from the last six months, IT returns, profit and loss statements from the last two years, etc.
Once you give the necessary paperwork, your loan is approved in a few minutes or hours.
When the loan is approved, the money goes straight into your checking account (or reaches the dealer if the bank has a tie-up with the car dealership). Then you can go to the dealer, finalize the model, and sign the papers to become the owner. After this, all you have to do is drive your dream car. You now own a brand-new car!