Buying a new vehicle is a huge decision for most families in India, where it requires proper budgeting, research and finance for selecting the best suitable option. For the first time car buyers, the decision-making process can be hectic as it may require choosing the best financing option from many available. While each factor is equally important, you can consider taking a car loan if your chosen car has a price higher than your set budget. Since many banks and financial institutions offer various deals, sometimes, people taking car loans for the first time may end up making mistakes.
Making a mistake while choosing a car loan may lead you to overpay. Here are some common mistakes that first-time car loan takers make, but can be avoided if you have the right information:
- Not Knowing Your Credit Score
It is the base for taking all loans. Knowing your credit score gives you an idea of your eligibility and interest rate options, which ensures if your car loan will get accepted by the bank or any financial institution. If your CIBIL score is low, try clearing the dues before taking any loan as it will help increase your creditworthiness. Higher CIBIL score attracts a lower rate of interest most of the time, thereby, helping you save money while taking a car loan.
- Negotiating on EMIs than Principle Amount
Some car loans have lower monthly payment options and longer tenure but lead to a higher principal amount. When someone is taking a loan for the first time, this option seems lucrative, but often leads to paying more than required. So, if you are considering taking a loan for your car for the first time, keep in mind to negotiate on principal amount rather than focusing on the EMI and longer tenure options available.
- Choosing No Down Payment Option
Selecting a No Down Payment or Zero Down Payment option is another temptation that can lead you to make a mistake while taking a car loan. However fascinating as it might sound not to have to pay any amount and turn in into a loan for buying a car; it often comes with hidden costs and extra charges. If you choose this option, you might end up paying more than your overall budget, which also leads to higher interest rates. You should analyze all your finance options before taking a zero down payment option.
- Not Comparing Quotes
Whoever takes the car loan for the first time often considers recommendations given by their reliable resources. However, you must search for your own before making any investment. Take quotes from more than two banks or credit lenders to get the best suitable option available to get the best offers and pay a reasonable principal amount over time.
- Rush to Sign Papers
It is a common mistake that most people make while buying a new car. Finding lucrative options without thoroughly going through the terms and conditions can lead to overpaying. Rushing to sign papers is a mistake that all car loan takers can make. Therefore, to avoid getting into a situation where you might end up paying more than you should, it is imperative to go through all the information, documents and ask questions to clear any doubts.
For avoiding any errors in judgement and regretting it later, carefully analyze your current financial situation and compare quotes from different credit lenders to get the best deals. Also, you can look for some discounts and other offers available with banks for car loans to reduce the principal amount. Reputable banks like Axis bank offer one of the best car loan deals, which can also help you save money.