Slowly, a car has started to find its place in the list of necessities for a family with an average income. In fact, the number of vehicles has grown so much that it has been predicted that by 2036, there will be nearly 2.8 billion vehicles worldwide! Unbelievable, right?
The basic reason why it’s very easy to buy a car nowadays is that every private and public sector bank or organization provides good car loan schemes at great interest rates. Moreover, the market for car loans is also very competitive, which is why the average car-buyer has many options to choose from.
If you wish to know how to get a car loan easily, we have some tips for you.
1. Get your credit report before applying for a loan
The interest rates on loans are often governed by various factors like your source of income, age, profession, and credit score. Even if you have a high income but a poor credit score, your interest rate might still be very high.
Lenders fetch the credit reports of loan applicants to check their credit scores and worthiness. If your credit score is 750 or above, you have a high chance of being approved for a loan.
Many lenders also offer preferential rates of interest to people with higher credit scores. So if you want to apply for a car loan, make sure to fetch your credit report from a bureau at least six months prior to submitting the loan application.
2. Know the rates of interest
The next important step is to know the rates of interest when you go to apply for a car loan. The market is very diverse and you have many options at hand, but it’s always best to do a bit of research beforehand to know the rates of interest.
This will also open up avenues for you to take loans from your preferred lenders. A reducing balance loan that charges low interest, as well as low charges, is the best.
Other than knowing the interest rates in the market, you must also be aware of the various loan charges. A car loan can be around 7 years long, so what you pay to the lender matters in the long run.
3. Prepare your documents
A loan is incomplete without submitting the proper documents. Proofs of your income, address, age, and employment are all needed for your loan to be approved. If you wish, you can talk to the lender beforehand and ask them for the documents that you’ll need to carry along with you.
Get all these documents ready before the application and get them photocopied too. In many cases, for salaried persons, a salary slip and accurate income tax return papers are essential.
Even if you’re not a salaried person, the lender or organization might ask to see your income tax files and paperwork. So make sure all your taxes are paid and there is no debt to anyone left.
4. Check prepayment options
You should always check the prepayment charges, also known as foreclosure charges. Lenders often levy these charges on car loans that are offered at fixed rates of interest. These prepayment charges can cost up to 5-6% of the total loan amount.
Moreover, some lenders also like to limit the number of prepayments that the borrowers can make during the entire tenure of the loan.
Therefore, if you want to go for fixed-rate loans, you should ideally choose a lender who does not impose too many restrictions and charges the least on making prepayments.
5. Don’t overestimate your EMI
EMI, as you might know, stands for Equated Monthly Installment. It’s important to never overestimate your EMIs because doing so can increase the risks of EMI defaults that occur due to income disruptions or financial emergencies. EMI defaults can make you pay hefty charges and penalties, and obviously, you wouldn’t want that.
Moreover, this can negatively impact your credit score. In the end, you might not even get the loan that you want and your credit card eligibility will also be in jeopardy.
Over to you…
These five tricks will enable you to get a car loan is quick and simple steps. All you have to do is provide the lender with proper documents and proofs and you’re good to go! Always remember to do your research and know about cars and car loans as much as possible beforehand.