5 things to know before applying for a car loan

How often have you thought of buying a car but put those thoughts away for want of basic information and things you need to keep in before applying for a vehicle loan?

While there are scores of banks and financial institutions that will help you get that loan there are some finer details that you need to watch out for.

If you too have applied for a vehicle loan or are planning to apply for one, then here are a few things you must know:

1. Shop online

Shopping for auto loan online is a great time saver. You can get almost all information at a click of a mouse and pick the best deal by comparing offers from different sites. The application process is also easier.

2. Know thyself!

You must know the basic criteria for applying for a loan. You must be above 18 years of age. Best is if you earn at least Rs 20,000 per month and have your six-month bank statement ready for your lender's perusal. This will help your lender understand your spending and saving habits better and may help you in getting loan at a cheaper rate of interest. Also needed is a proof of your residence and employment history.

3. Get approved first

Don't make the mistake of looking for a car before getting a bank's approval. Get your loan approved first from your lending bank or finance company. Then get a sanction letter from them to know the amount of loan approved. Doing this will save you frustration and disappointment later.

4. Down payments

This varies from lender to lender, and some don't even require you to make a down payments. But typically it's about 10 per cent of the price of the vehicle you want to purchase.

5. Interest rates

Interest rate is not fixed as most people think, but it can surely be negotiated. If you have good negotiating skills you can bargain for a lower interest rate. But some factors are way out of your control such as the state of the economy. If interst rates move up – like they are doing now – the rate at which you borrow money to finance your vehicle will also go up.

Finally, it is always better to ask an authorised dealer or loan official for their advice. They are there to help you. If there is something you don't understand, ask them NOW or you may face headaches later.

Easyfinance.in provides information on home loan, car loan, personal loan, mortgage loan, education loan, business loan, term loan & project loan in India.