5 Common Mistakes to Avoid When Applying for a Car Loan
Many people today dream of owning a car at some point. Car loans are a convenient way to own their dream car in many scenarios. Buying a car on finance is a good deal if you are cautious about a few factors. A free CIBIL score check using the CIBIL score app will give you an idea of whether your loan application will be approved. The right car loan can help you avoid spending your savings, make flexible payment plans, etc. Nevertheless, car buyers sometimes make common mistakes while applying for a car loan. Selecting the car people want to buy before evaluating the available finance options is a common mistake many people make.
5 Common Mistakes You Can Avoid When Applying for a Car Loan
Some common mistakes to avoid while applying for a car loan are as follows:-
Borrowing More Money Than You Can Afford
Owning a new car can be exciting, and purchasing a car suitable for your needs and which fits your budget is natural. Nevertheless, it is advisable not to be over-excited and borrow more than you can afford and repay. A large loan amount can imply financial stress and a high chance of default. Before applying for a car loan, calculate the amount you can pay monthly and base your loan amount on that. After that, select a car fitting in that budget range instead of doing the opposite.
Not Knowing Your Credit Score
Many of you might not have any idea about your credit score. Not knowing your credit score is not good because it clearly mirrors how a banking or financial institution would deal with you while giving you a loan. The lower your credit score, the higher the interest rates on car loans. Many banks and financial institutions avoid lending to borrowers with low credit scores. Therefore, a free CIBIL score check is necessary before opting for a car loan by signing up and logging into official portals of credit bureaus or installing the CIBIL score app. Ensure to have a clean record. After meticulous financial planning and checking your credit score and report, you should apply for a car loan.
Selecting the Wrong Loan Tenure
Keep in mind to use an EMI calculator to select the right loan tenure. Generally, the tenure of a car loan varies from one to seven years, based on the type of loan you have opted for. A short loan term can imply high EMI payments, but you can repay the loan quickly within a short time. On the other hand, a long loan term would imply smaller EMI payments with a high interest payment. The longer the loan tenure, the higher the interest will be. Although the EMIs are smaller in loans with long tenure, in the end, you repay more than you have borrowed. Therefore, selecting a short-term loan is advisable.
Not Researching Enough
Researching meticulously, comparing the terms and conditions, interest rates, loan tenure, customer services, approval speed, etc., before finalizing and approaching a loan provider. Factors like hidden costs and fees, including prepayment, penalty on loan preclosure, etc., can make an enormous difference to your loan cost. Take some time and shop around for the best deals on car loans. You must check all the available options, see who offers what, and select a deal with the best interest rates and features.
Not Reading the Agreement and Saving for Down Payment
Clearly understanding the loan terms and conditions is beneficial if you do not want nasty surprises later. Therefore, be sure to read through the fine print meticulously and in detail and understand the clauses thoroughly before signing the dotted line. In case of any doubts regarding the loan agreement, clarify them with your loan provider. Making the largest possible down payment is a good financial habit.
Conclusion
Always remember the above points before opting for a car loan. Only a cautious selection of car loans will help you benefit from it. Therefore, always plan keeping in mind factors such as free CIBIL score check, loan duration, interest rates, future financial needs, etc. Saving that amount of money over a car loan’s life is worth the research and time it takes to finance and procure your car loan on reasonable terms and conditions. You can download the CIBIL score app on your smartphone and check your score before applying for a loan. Refrain from making hasty decisions regarding purchasing a car and applying for a loan. Instead, research thoroughly and make conscious decisions to ensure a smooth and trouble-free loan journey.
