For most families in India, buying a new vehicle is a huge decision, requiring adequate budgeting, research, and finance to choose the most appropriate choice. The decision-making process can be hectic for car buyers for the first time as it may involve selecting the best financing choice from several available ones.
Although each aspect is equally significant, if your selected car has a price higher than your set budget, you should consider taking out a car loan. Since many banks and financial institutions give different offers, individuals taking car loans for the first time can make mistakes often.
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Making a mistake can cause you to overpay when choosing a car loan. Here are some common mistakes made by first-time car loan takers, but if you have the right data, they can be avoided:
- Not Knowing Your Credit Score
This is the basis of all loans. Knowing your credit score gives you an awareness of your choices for eligibility and interest rates, which means that the bank or other financial institution can approve your car loan. Try clearing the dues before taking any loan if your CIBIL score is low, as it will help improve your creditworthiness. Most of the time, the higher CIBIL score earns a lower interest rate, helping you save money while taking out a car loan.
- Negotiating on EMIs than Principle Amount
Some car loans have smaller options for a monthly payment and longer-term but contribute to a higher amount of principal. This choice seems lucrative when someone takes out a loan for the first time but often pays more than the necessary amount. Therefore, if you consider taking a loan for your vehicle for the first time, remember to discuss the principal sum instead of relying on the available EMI and more extended tenure options.
- Choosing “No Down Payment” Option
Another temptation that may lead you to make a mistake when taking a car loan is selecting a “No Down Payment” or “Zero Down Payment” choice. It might seem attractive, though, not to have to pay any amount and turn it into a loan to buy a car; it also comes with hidden costs and additional charges.
You could end up compensating more than your total budget if you choose this option, which also contributes to higher interest rates. Before taking a zero down payment option, you should evaluate all your finance options.
- Not Comparing Quotes
Whoever takes the car loan for the first time always considers suggestions provided by their trustworthy properties. Before making any investment, though, you must look on your own. To get the best suitable alternative available, take quotes from more than two banks or credit lenders to get the best rates and pay a fair principal sum over time. You should also check the car loan EMI calculator online to get a better picture.
- Rush to Sign Papers
It is a common mistake that most individuals make while purchasing a new vehicle. Finding lucrative options can lead to overpayment without going through the terms and conditions thoroughly. Rushing to sign papers is a mistake that can be made by all car loan takers. Therefore, it is imperative to go through all the data and documents and ask questions to clear up any concerns to avoid getting into a situation where you may end up paying more than you should.
To prevent and regret any judgment mistakes, carefully evaluate your current financial condition and compare quotes from various credit lenders to get the best offers. You should also look for specific discounts and other incentives for car loans from banks to lower the principal sum. One of the best car loan deals is provided by reputable banks such as Axis bank, which can also help you save money.