In today’s time, owning a car is no longer a big deal. Just a simple Google search populates your browser with innumerable lenders, willing to finance your dream of purchasing a car, by paying a fixed interest rate. You can just take out a car loan and pay it off in easy EMIs over a stipulated tenure. However, due to the wide number of financers, one often tends to get confused about the things to consider when taking out the loan. As a result, most borrowers end up making several mistakes which later affects their finances in the long term. If you are thinking about taking out a car loan, ensure you avoid these 3 mistakes.
Mistake 1 – Not comparing lenders
No matter what we shop in life, we have a tendency to compare various products before we choose the one that we like. However, most people forget about this golden rule when it comes to taking out a loan. It is extremely important to do your homework, instead of just walking into a car showroom to purchase your car. Comparing different lenders allows you to track a good deal, and helps you find affordable financing. Before you set foot in the showroom, go online and see the various auto loan deals offered by different lenders. Check the various options available and select one which you deem beneficial in the long run.
Mistake 2 – Focusing solely on the EMI
Most borrowers tend to focus only on the EMI. Yes, we understand that the EMI amount is the golden number that you have to consider, but solely focusing on the EMI is not the right thing to do. An EMI that sounds affordable may not always be reasonable. It does not necessarily mean that you do not have a better option. Instead of blindly focusing on what looks like an affordable EMI, ensure that you consider the big picture when you apply for car loan. Remember that smaller EMIs are directly related to higher interest rates and higher tenures, therefore the total repayment amount could also be high.
Mistake 3 – Not opting for a down payment
It sounds extremely tempting to not make a down payment on your loan, thanks to many lenders who now offer 100% finance on your loan. Even in cases where you get 85%-90% financing on the car, the down payment amount is very low indeed. While the idea of taking home a brand new car without paying a single rupee is extremely romantic, this gimmick of 100% financing is just a way to lure customers. A zero or a small down-payment basically means you will be paying more money on EMIs in the future. It also means that you will be paying higher interest rates on your car loan. Besides, these, you will also be paying additional processing fees, which your lender may conveniently factor into the equation, without you even knowing it.