Simple Car Loan Mistakes You Should Avoid

A car is no longer a luxury, but it is a necessity. The demand for four-wheelers has significantly increased during the last few years. In addition to the rise in the sales of new cars, the used car market has risen.

The next time you want to buy a car, striking the best deal is insufficient. You must not just focus on negotiating the lowest price for the vehicle.

Here are five simple used car loan mistakes you must avoid.

1. Choose a longer loan tenure.

You may want to reduce the equated monthly installment (EMI) and choose a longer loan tenure. However, you pay more interest over the long period in this situation. It is recommended you select the shortest term depending on your repayment capability. This will prevent you from facing financial distress in the long run.

2. Avoid checking credit score

The used car loan interest rate depends on your credit score. If you have a higher score, you may be able to avail of the loan at a lower interest rate. Even if you can reduce the rate by 50 basis points, you will save significantly during the loan tenure. Therefore, you must check your credit score and rectify any errors that you may find in the report.

3. Focus on the EMI

You may want to lower the EMI to reduce your repayment burden. However, focusing solely on reducing the EMI is not intelligent. You need to calculate the total amount you will repay, including the principal, interest, processing fees, and other charges. If this amount is high and you cannot afford to repay the same, you must rethink your decision to avail of the used car loan.

4. Not conducting research

Several banks and non-banking financial companies (NBFCs) offer different types of car loans. It would help if you did your homework to secure the most beneficial deal. You must understand the various features, terms, and conditions before you sign on the dotted line. You must read the loan document carefully to ensure no unpleasant surprises in the future.

5. Think emotionally

You may start with a budget when looking for a used car. You must ensure the salesperson does not compel you to buy high-end models and stick to your pre-determined budget. He may provide you with a fantastic deal; however, you will have to face unnecessary stress while repaying the loan if you are tempted.

Although used car finance makes it easier to own your dream vehicle, you must be cautious while availing of the loan. Like other loans, auto finance must be repaid promptly to avoid disastrous outcomes. Therefore, you must take your time and make a hasty decision that may have severe implications in the future.