Checking car loan interest rates to buy a car? Stop! First read these 5 power points before applying

Looking for a car loan? Wait! Don't rush. While opting for a car loan, everybody knows that all that you need to do is to pay some amount as downpayment while buying a car and the rest of the showroom price would be financed by the bank. A car loan applicant can decide the period of loan repayment, which can be up to seven years. However, while opting for the time-frame in which the loan applicant wants to repay the loan, the applicant must know that the period he or she chooses would decide the rate of interest on the loan he or she is applying for. So, a car loan applicant must check about the interest rate before applying. But, there are some other factors too, which a car loan applicant must know.

Here are the top 5 tips that would help you save your hard earned money being wasted if the process to get a car loan is done in a hurried manner:

1] CIBIL Score: After receiving your application for the car loan, the lending bank would evaluate your credit rating i.e. CIBIL rating. Generally, a loan is approved when the CIBIL rating is above 750 points. In that case, there are chances for the applicant to bargain for the lower interest rate, which generally a loan applicant doesn't do. So, when you apply for the car loan or any other loan, you must confirm the interest rate the lending bank would be levying. But, this should be done when your loan is approved. In such a scenario, the bankers don't want you to slip from their hands. Remember, there is a possibility for around half a per cent relaxation in the loan, which people don't pay attention while opting for a car loan.

2] Interest rate comparison: A loan applicant can bargain with the lending bank over interest rate only when he or she is well aware of the lending rate of various banks. So, before applying for a car loan, one must do some research work to fish out the interest rates of various banks and then only apply for the loan. If he or she has done that, it will be helpful for it at the time of bargain over the interest rate.

3] LTV (Loan to Value) ratio: This LTV ratio is the proportion of the net finance that a loan applicant would get from the bank. Generally, none of the banks funds 100 per cent of the showroom price, but it is advisable for the loan applicant to do the downpayment as much as he or she can because it helps them lower the interest rate that leads to lower EMI. So, don't put pressure on the lending bank to fund a higher percentage of the car price, it leads to higher interest rate and higher EMI, which might become an extra burden on your monthly budget.

4] Keep a check on EMI: While opting for a car loan, the loan applicant must keep his or her eye on the EMI he or she will have to pay after availing the car loan. it helps them assess the affordability of the EMI. Most of the lender offers up to 40 per cent of your net monthly take-home salary as EMI but taking the higher side of the EMI may affect you other monthly assignments like investments, monthly expenses on households etc. So, after assessing the affordability of the EMI, one should decide the tenure of the loan.

5] Processing Fee: It is also an important variable that one must pay attention while applying for a car loan. It has been found that during festive seasons, lenders offer zero processing fee but inflate the interest rate to pare that waiver. So, while going for the car loan, an applicant must keep his or her eye on the processing fee and the interest rate.