Down payment and car loans are indirectly proportional with each other, i.e. higher the down payment, lower will the stress related to loan payment and vice versa. That is one of the major reasons why advisors emphasize so much upon significance of down payments. Depending on car loan interest rate and the loan length, the bearer can save thousands of rupees just by making a larger down payment. It is recommended to keep this point in mind while one decides his budget and kind of car he needs to purchase.
The famous saying ‘well begun is half done’ stands quite true in this respect. So, a slightly larger down payment in the beginning reduces your principle amount and EMIs to a considerable extent. But always be a little careful before you take this step. Sometimes, there are chances of falling prey to hidden numbers. For e.g., if your dealer says that an additional payment of Rs.20000 will reduce your EMI by Rs.300, then it’s a poor trade-off, better stay away from it. But if the length of your car loan extends to 48 months and an extra payment of Rs.20000 will reduce your EMI by Rs.1000-2000, go for it. It’s better to bear the brunt in one go than letting it burn you on a monthly basis.
Also, take care of your loan term. In case it exceeds 60 months, better take significance of down payment in account. Longer loan term means more payment per month and bigger losses over all. Making a larger down payment for car under such condition is not only a smart step but also savior many times. It bears the same relevance with car loan interest rates and extra costs. So, next time you get in for a new car loan, better consider the significance of down payment before making any decision.
