Four Questions to Ask When Financing a Car
Four Questions to Ask When Financing a Car
Posted on September 23, 2019
So, you have found your dream ride but anxious about the finances to pay off for it. Well, you don’t have to worry as long as you have a good credit score and a stable monthly income to dedicate a part of it towards EMI.
There was a time when buying a car was a big decision, but considering the number of auto loan companies increasing at such a fast pace, it is no more a stressful settlement. Nowadays, there are affordable rates of interest, minimum processing fees, and longer duration repayment facilities to ease the purchase for interested car buyers.
Financing a vehicle nowadays sounds more sensible to people instead of having to pay the entire amount by cash. It cuts the immediate financial burden of car buyers and allocates it in the next few months or years.
However, you need to be extra cautious of the advertisements and claims as given by various lending institutions and not get fooled by the deals that accompany the loans.
Whether you are financing or refinancing the current auto loan, here is a list of few questions to help you make the most appropriate decisions.
Q1 – What interest amount will I be paying?
This is the first question that you should be asking the banks or lending companies. Every lender charges different rates, hence it is important to gather accurate information and compare which one of them offers relatively lower interest rates.
Your actual interest rate may be impacted by your credit score and history as well, so speak to several dealers to get the best deals.
Q2 – How much amount the bank will finance me?
Mostly, the banks offer 80%- 90% loans for the showroom price of your car, and you pay the rest of the amount. Then, your finance rate, loan term, and down payment amount determine how much you are required to pay as EMI.
The larger the down payment, the lower is the amount of loan and interest rate charges for each month. Thus, be calculative as to how much financial strain you can handle and what would be beneficial for you in the long run.
Q3 – What is the total price that I will have to pay for the car?
You have to bear this in mind that apart from interest rates, you have to pay numerous other charges to the lenders. Expenses like processing and documentation fees, prepayment, foreclosure, late charges, etc. add up to the total cost of the vehicle loan.
So, you better evaluate these costs to avoid getting surprised and regret your decision at the end of the day.
Q4 – How long will it take to pay off the car?
The loan repayment tenure is the time within which you are required to pay off your auto loan. Different financial institutions offer different tenure durations and terms. Opting for shorter tenure means you have to pay more down payments, and longer tenure would put immense pressure on your monthly budget.
As a sensible applicant, you are required to do smart financial planning and work out on a sensible tenure with balanced EMIs.