Car loans have suddenly improved the affordability of having a car. All you need to do is pay a certain amount of the total cost as a down-payment amount. The rest of the cost can be paid through loans at very affordable interest rates, which can be paid back over tenures of upto 7 years in the form of EMIs.
If you are planning on buying a car with easy car loans, then go through these 6 factors to consider before applying for a car loan:
Fetch your credit report before making a loan application
While calculating for a car loan application, lenders will check your credit report to assess your creditworthiness. Some lenders also provide pre-approved car loans based on your credit score. Usually, people with a credit score of 750 or above have a greater chance of loan approval. Many lenders also take a lower interest rate to those who hold higher credit scores. Thus, grab your credit report from the online lending marketplaces at least 6 months before applying for cheap car loans. This will help you check your credit scores beforehand and provide you with enough time to take corrective actions to improve your credit score. This process will also allow you to examine eros and fake transactions, which can be corrected to improve the credit score, and thus, you’ll be eligible for the loan.
Compare interest rates across all lenders.
Interest rates on easy car loans range from 8.80% to 16% based on the lender, car model, employer, credit score, etc. In addition, several lenders also provide preferential interest rates to their existing customers. Thus, you should first check with the existing bankers on their car loan offers. Later on, visit online lending marketplaces to get the best deals from other lenders available on your income, credit score and other eligibility parameters. Finally, when comparing other options, make sure you check the car loans offered by dealer finance companies.
Loan to Value (LTV) ratio
This is the proportion of the car’s buying price, which the lender will pay. The rest is also called margin or downpayment money, which must be paid from your own money as we know that all lenders do not lend upto 100% of the car’s value. Therefore, you should compare the Loan to Value (LTV) ratio provided by different lenders. A quick tip: make a higher downpayment to help you get lower interest costs. A higher downpayment also helps you access a lower interest rate and other better loan deals. Do not finish all the emergency funds or redeem long-term investments when performing such a process, as they can badly impact your future finances.
Evaluate your EMI affordability
Examine your EMI affordability by eliminating all the essential monthly expenses, like household expenses, ongoing EMIs, SIP for important financial targets from your net income per month. Most lenders select your total EMIs, including new car loan EMI which has to be within 40% of your net income per month. Once you know your EMI affordability, choose a shorter tenure to decrease your interest cost.
Do not ignore the processing fee.
The processing fee of your cheap car loans can be up to RS 10,000. At the same time, several lenders decrease or let go of their processing fees during festive seasons. So one has to make sure that they are not being charged a higher interest rate or any other charges to make up for the concession of the processing fee.
Check foreclosure or prepayment charges.
If you choose to make a prepayment of your car loan, you can get your interest cost reduced. However, several lenders impose prepayment charges on car loans lent on fixed-rate loans, which can touch a 6% mark of your outstanding loan principal. In addition, many lenders limit the number and amount of prepayments done within a year or during tenure. Hence, while choosing your lender, select the one who imposes minimum restrictions and charges the least on making prepayments.
Conclusion
If you fit in such a category, FreedomCars are here to help you out. Contact us right away!
Source URL: https://www.freedomcars.com.au/
