How to get a best deal on car loans You’ve been thinking about buying a car or exchanging your old car for a new one. The recent car launches and the constant full page ads by dealers have pretty much convinced you that now is a good time as any to buy a car. You begin to think about your budget and finance options. Be it a new car or a used one, banks are more than keen to offer a car loan. Today it’s easier than ever to get a car loan. However there are a few things you need to keep in mind when shopping for a car loan. Check your eligibility first When was the last time you saw your credit report? As a first step you might have already arrived at the amount you can afford to pay as instalments. In addition to that you must also review your CIBIL credit score and credit report to rule out any discrepancies and to understand your credit worthiness. Did you know that 79% of the loans are approved for individuals with a credit score >750. Your CIBIL credit score & report can be acquired by submitting a request form at https://www.cibil.com/online/credit-score-check.do and pay Rs.500/-. Raise a dispute if you notice any discrepancies before you apply for a loan. Creditors tend to fleece you with higher interest rate if you score is below 750. Visit more than one dealer and negotiate Don’t finalize with one dealer if the brand has more than one. Visit other dealers, put your negotiation skills to use and get the dealer to give you a discount. If you are planning on buying a new Alto K10, visit Mandovi, RNS, Pratham and others before you finalize. You will also notice a lot of discounts and deals during festivals and holidays. You can choose to shop online and have the dealers approach you with offers. Higher discount means lower loan amount needed. In case of a discount, go for a cash discount in the down payment or loan amount instead of a marginal reduction in interest rate Check the manufacturing date of the car you are purchasing. A car manufactured in Dec 2015 and one manufacture in January 2016 will have significantly different resale values Let the sales team know that you are serious about buying and they are sure to offer you a discount to close the deal especially if it’s in the 2 nd half of the month/end of financial quarter. The Loan The recent rate cut of 50 bps announced by RBI is a blessing for potential car buyers looking to avail a car loan. As show in the image below a car buyer stands to save between Rs.6960 and Rs. 11568 depending on the rate cut of 30 bps and 50 bps passed on the customers by the bank. However you also want to explore the options below
Like in the case of car shopping, look for the best rate by speaking to multiple banks. The bank that the dealer has tied up with may not necessarily give you the best deal. You can shop for loans online too on a site like www.bankbazaar.com and www.paisabazaar.com Speak to the bank that you already have a relationship with. They are likely to offer attractive rates because you are an existing customer. The same applies for car loans applied through a bank where your salary is credited. You are likely to get lower interest rates because of the corporate relationship. Nationalized banks tend to offer better interest rates than private banks Ex: SBI Car Loan Interest Rate is 9.85% compared to Axis Bank at 11.50% - 12.50% You could also avail loan against Fixed Deposits. The advantages are that the loan amount can b up to 90% of your FD amount and there may be very low or zero processing fees. The interest is usually 1 to 2% above the interest paid by bank on your FD. It may vary from one bank to another. You will also continue to earn interest on the FD. You cannot however break the deposit or avail any tax benefits for the interest you pay for this loan. Check for pre-payment penalty clauses if you intend to pay it off sooner than tenure. Opt for the lowest or ask for a waiver. Opt for a tenure that’s not more than 3 to 5 years. You don’t want to be paying a lot of interest by opting longer tenure and lower EMI. A 7 yr tenure for a 5 lakhs loan at 9.75% will set you off by almost Rs.60000/- compared to a 5 yr tenure. Interest rates from manufacturer’s finance company tend to be lower compared to rates offered by banks Interest rates on pre-owned cars are always high depending on the age of the car. They tend to be in 14% to 16% range or higher. As much as possible go for full payment instead of having it financed Hope these tips come in handy when you are looking to buy your car. __________________________________________________________________________________ CarServo connects you to car service centers in Bangalore for all your car care needs. Locate Maruti Service Center, Hyundai Service Center, Chevrolet service center and more by logging to www.carservo.com. Book online and save time!