There are very few who can stump up complete price of car while buying it. Others prefer to go for car financing. However, it is mandatory to know how to arrange the best auto finance deal. You will be approached by a number of lender and financing agents. Here is the A to Z of car financing that you might want to note down before settling down for any one.
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When you borrow a loan for a car, you have to pay it back in a foxed period of time which may vary from 3-7 years. Along with, different rate of interest is charged from different lending organizations. Compare all the plans and their interest rates before plunging into paper work.
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You can pay back the loan in several ways. You can choose to go for the monthly installments i.e. EMIs whose amount depends upon the payback time and interest rate. You can also go for balloon payment options which require you to pay smaller EMIs in the beginning and lump sum amount in the end. Options vary on various bases like your income, credit history, or whether you are buying a new car or a used car.
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One of the biggest benefits of taking car loans is that you own the car right as you drive it to your forecourt. On the other hand, the biggest disadvantage of car finance in India is that the car’s value depreciates at a very quick rate. By the time you are done with loan payback you might be paying off more for the car than its actual value. A suitable option for this condition is to make a larger down payment and reduce the period of EMIs to just 1-2 years.
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Always take care of your credit rating as it will be of great help in getting the most reasonable car finance deal. The better your credit score better are the chances of getting lower interest rates and higher principle amount.
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Most important thing to know about car financing in India is that car financing companies mostly pay only a part of your car’s price especially when you are going for a used car. In case of new car, if you are lucky and you have good credit score, your lender may finance up to 80-90per cent of car price. Rest you will need to manage yourself.
