10 Tips to Save Money on Car Loan: Short Tenure, Low Interest & more
Decade earlier, owning a car was considered a luxury. However times have changed now. With increased earnings of Indians and growing distances, car has become a necessity belonging now. And as more and more companies are offering newer models, there is plenty of choice available for the interested buyers. And with plenty of loan options available in the market, buying the same has become more convenient.
Buying a car involves too much research especially the pricing part. But many people often forget that little bit of more research on car loan is also essential. Planned research is very important while seeking vehicle financing as it can save good amount of money provided your budget is fixed.
Here are some pointers on saving money when taking a car loan:
Do market research & compare prices:
Always do price comparison check at multiple lenders. And select lender offering best rate. While doing this – check for interest rate, processing fee, pre-payment fee and others.
Check Credit Report:
This one is for individuals who are seeking loan and not buying car by making full payment beforehand. First and most important thing to do is getting the credit report from the credit bureaus. By doing this you will come to know about the possible shortcomings in your credit profile. You can get credit report from official CIBIL website.
Many banks also offer credit report facility such as ICICI Bank, HDFC Bank. Details are available on their website.
- Here’s the link of ICICI Bank to check credit score (Copy & paste it in your browser for opening) – https://www.icicibank.com/Personal-Banking/debt-service/credit-score.page
- Here’s the link on HDFC Bank with an offer of 10% cashback on accessing credit report- https://www.hdfcbank.com/htdocs/common/NetBanking/cibil-cashback.html
Avoid taking credit report from any third party services. If you already have taken credit then getting your credit rating checked is very beneficial.
Additional reading: car loan for CIBIL defaulters.
Reason why credit report should be first checked is car loan rejection and its implications. After making a loan application, if you come to know that your credit score is poor then chances of your application getting rejected increases. And this further leads to negative reporting in the banks data. And same status is sent to the bureaus.
Bargain on interest rate:
This tip works best for existing loan customer. If you are a regular EMI payer, then chances of bank reducing the interest rate are higher. Even if you are not an existing customer, you should still bargain for lowering the interest rate.
Do not every time trust on dealer:
When you buy car, dealer will offer car loan as per his/her choice. However this deal offered by the dealer may not be the best one. So always compare rates and select loan which is at your advantage in terms of money.
Do not over cross the budget:
Fancy items are always attractive. Same holds true for car. There are various car with fancy designs available in the market with varying price ranges. However one thing you should keep in mind is buy a car within your budget. There is absolutely no point in buying expensive car and pay large sum.
Read about minimum income required for car loan.
Do not apply with multiple lenders:
If the loan application gets rejected, then often people apply at multiple lenders. But this is a big mistake as your credit score gets impacted. Lenders report this to credit bureaus. Banks or any other loaner hates credit hungry borrowers.
Choose shortest tenure:
Earlier you repay the entire loan amount, higher would be the savings. By choosing the shortest tenure, you can save good amount of money on the interest as total money outgo will be on a lower side.
Make a down payment:
Try to make as much down payment possible. Higher the down payment, lower would be the car loan amount. And hence higher savings as interest payout largely reduces.
Car loan against fixed deposit:
If you have FD account with the bank and do not want to break it; then you can utilize the same to get car loan. Few advantages of FD against traditional loan are – interest rate offered is low; so higher savings, no processing fee is applied, documentation is not cumbersome, etc. Most importantly you will continue to get interest on the FD account.
Consider personal loan for car:
This is also an option and has it’s own pros such as car ownership remains with you, when you do not have money to make down payment and many more. Read it here.
Always remember that car is not an asset. Its value (i.e. price) decreases the day you buy it and further decreases as it ages. So try to save as much money you can on car loan EMI.