Car Loan Interest Rates - Plan your Repayment Before

The only hindrance that prevents us from purchasing a car is the finance. The huge amount required to buy a car refrain us. But with the availability of loan products it has become easy to buy the car first and pay for it later. A unique loan product that makes it possible to own up a car is a car loan. The lender on the behalf of customer pay to the car dealer and redeems the same later in installments. It becomes convenient for the borrower to settle the debt via small payments. The repayment we make involves interest as well.

So, our EMI constitutes a part of the principal loan amount and interest amount. Therefore, in order to keep the EMI amount low, we need to search for the lender who provides the credit at lower rates. Lower the Car loan interest rates, lesser the burden of repayment. Low rates make your loan journey smooth and comfortable. It puts less pressure plus lets you fulfill your dream.

There are various lending institutes that offer the credit facility. This facility can be used for the purchase of both old and new cars. However, the lending rates differ on both. The factors that determine the rate of interest is the condition of the car. On new car loan, the rates are lower in comparison to the rates offered on the used car loan. However, there are several factors that play a crucial role in the determination of interest rate.

Factors Affecting Car Loan Interest Rate

1. Credit Score - The lenders take high interest in the credit score of the applicant. It plays a crucial role in finalising the deal. It is an important factor that determines whether the individual is eligible to avail the facility or not.
2. Income is to Debt Ratio - The other factor that controls the interest rate is the amount of money the applicant owes to others. The lender views the amount of money that the applicant has earned in that specific period. Through this, the lender realizes how much time the borrower will take to repay the loan.
3. Credit Size and Repayment - The amount of down payment is indirectly related to car loan interest rate. Higher the down payment, lower will be the lending rate.  
4. Age of Vehicle - It is the most important points with respect to used cars. If the car is new it will attract low interest charges. Whereas, on the used car, the charge would bear direct relationship with your car’s age. The older the car higher the rates.
5. Loan Repayment Tenure - The duration also acts as a deciding factor while determining the rate. If the tenure is long then the borrower has to pay interest at high rates and vice-versa.

For the potential car buyers, it is advisable to keep the loan tenure short. Though the installment amount on longer tenure may be less, but ultimately the borrower ends up paying high interest. If capable, one should always avail for short term loans. Taking a Car loan is not bad. But the problem is not repaying it on time. This affects your CIBIL score. And in future the lender averse from giving you the loan. Maintaining a good CIBIL is important for you to avail any credit facility in future.

If you have a dream of owning a car don’t sit back thinking of unavailability of funds. As it is said, “ Where there is will, there is a way “. If you are determined to have your own car, without giving a second thought apply for the loan. To take the benefit of same you need to fill the application form. The form comprises of the following sections:

1. Personal Details
2. Income Details
3. Loan Details
4. Details of car model
5. Details of co-applicant
6. Signature

Apart from this, for verification, you need to attach certain documents. These documents include proof of identity, address proof and income proof. You also need to provide the bank statement and pro-forma invoice or rate list. Once these are submitted the application is registered and after the qualification check and thorough verification the application is approved or rejected accordingly.