Planning a car loan? Pay maximum down payment

This will reduce your interest cost over the tenure of the loan. It will also allow you to opt for a lower tenure or lower EMI, suggests Sanjay Kumar Singh.

Try to limit the loan to an amount such that the EMI does not exceed 15-20 per cent of your take-home salary.

Remember that you would have other loans also and the EMIs of all of them should together not exceed 50 per cent of your take-home salary.

The car loans available within the dealer's premises may not be the most attractive.

Scout around for better deals on your own despite pressure from the dealer to take a loan from one of his lender partners.

Many public sector banks offer attractive interest rates (see table below) starting at below 9 per cent.

Pay the maximum down payment you can afford.

This will reduce your interest cost over the tenure of the loan.

It will also allow you to opt for a lower tenure or lower EMI.

Use online tools to compare car loan rates.

Keep in mind the foreclosure charge.

If it is high, you will have difficulty in closing your loan early.

Business owners can deduct the interest paid on a car loan when filing their tax returns.

Salaried people do not enjoy this benefit.

Sometimes, you can get a better deal if you approach a bank towards the end of the month, when they have their monthly target to meet.

• MONEY TIPS