14-Nov-2018 written by : FSI-Team
The festival season is around the corner, which means e commerce portals are lining up to roll out a slew of attractive offers. However, banks and other financial institutions are also aware of the season’s charm and shall offer loans and credit cards at attractive interest rates and easy repayment terms. So, if you are interested in buying a car and need a loan, the festive season is a good time for that. But how do you find the best car loan? In this blog, we will answer many questions like these.
During big festivals such as Christmas or Diwali, banks offer attractive loans for a short period to increase sales. So, you can look to get a lower car loan interest rate and processing fee than other times of the year. Other than that, the funds are disbursed faster too due to the huge demand. Thus, it can be a good idea to get an auto loan during the festive season, granted that the terms and conditions are suitable for your requirements.
To get the best loan in the market, make sure that you consider the following factors:
You can't make the most of the offers available if your credit score isn't high enough. In fact, if it's below average, then you may not even qualify for a loan in the first place. Thus, before the festive season starts, check your credit report and make sure that it shows a high score and is devoid of mistakes or discrepancies that may lead to your application's rejection. If your score is low, then you can take appropriate measures so that when the time comes, you are prepared.
Most car dealers offer financing services for the convenience of their customers. So, if you choose to opt the same, they can arrange the car loan on your behalf and even guide you through the entire process. However, there is a catch- they may charge you a high amount and you may not even get the best deal possible. This is because the car dealers often have partnerships with select banks. So, if you ask them to offer financing service, then they will offer the same through the bank they are partner with. Since they also charge a commission, that comes out of your pocket.
If you are in a hurry, then you can choose to finance the car through the car dealer. However, if you want the best car loan interest rate and other benefits, then you can do some researching and pick a loan yourself.
Don't make the mistake of comparing flat interest rate and reducing rate. This is because in both cases, the total interest amount paid is the same. For instance, a flat rate of 5.64% is the same as reducing rate of 10% in terms of total interest paid. However, a bank may try to trick you into believing that the flat rate is a better option. Ideally, what you should look for is the lowest standard interest rate in all options.
A car loan comprises various types of charges which are:
Processing fee: Usually, lenders levy a processing fee on the loan which is around 0.5% to 1% of the total amount. However, during the festive season, you may get a loan on which the fee is not levied.
Documentation charges: Documentation charges can be anywhere between Rs. 300 to Rs. 1,000.
Prepayment charges: If you decide to prepay a car loan i.e. repay the full amount earlier than the actual date for the final EMI, then the lender may charge you a prepayment fee. Thus, it’s always a good idea to get a loan in which no prepayment charges are imposed.
Banks launch some of the best offers for car loans in festivals. However, no matter how good a deal looks on the surface, make sure you read the fine print before making a decision.