Buying a car is a matter of pride especially if it is someone’s first car. In fact, owning a car is seen as a milestone in one’s personal and professional life. A car makes the daily commute quite easy. With the booming economy, the number of cars plying on the road is increasing each year. Also, the state of public transportation makes owning a car necessary.
However, you can buy a car in two ways. You can either go for a car loan or you can self-finance your own car. You can go for the second option if you have a deep pocket and willing to buy a car by paying off in full cash. But you must be careful while taking the step to self-finance the car. Although self-finance way will save you some money which you were supposed to pay as interest, but it can be harmful in the long run as it may ruin your emergency funds. You must gauge all the pros and cons of self-financing before you take the decision.
If you are not financially healthy then you can consider taking a car loan as it would lessen your financial burden and not burn a hole in the pocket. But not everybody is eligible for a car loan. So, before you apply for a car loan, you must check the car loan eligibility conditions. The eligibility criteria are the major factors on the basis of which almost all banks and NBFCs agree to give a loan.
Below are some of the eligibility conditions which you must fulfil:
Basic criteria: The individual should be a minimum of 21 years of age and maximum of 60 years of age at the time of the loan maturity. The salaried individual should have a minimum 1 year of employment and a minimum annual salary of Rs. 2.4 lakhs per annum.
Check Credit Score: It is important to note that to get a cheap car finance one must have a high credit score. You can check your credit score online at free of cost.A credit score is a number which indicates a consumer’s credit repayment ability. The credit history is used by lenders and banks, which forms an evaluation for a credit application. The credit score ranges from 0 to 900, the higher the score is, the more the repayment ability of an individual is.
The credit score below 350 is not seen in a good light by lenders. You can check your credit score online. If your credit score is lower than 400, then probably you should not apply for a car loan. On the other hand, a high credit score is likely to get your car loan approved.
Decide your Payment : If you have a high credit score, then you can decide on the amount of money you can afford to pay each month as EMI and the tenure of the loan. You can use the car loan calculator to calculate the amount of money you need as credit.
Get Pre-Approval: In the world of internet banking, you can get car loan approvals online. You should not just solely depend upon the banks and other financial institutions offline for the car loan. You can check the rate of interest offered on car loan online.This knowledge will give you an upper hand when negotiating on the rate of interest with your bank or any other financial institutions. If you qualify for the online car loans, then you are likely to get a pre-approval that will be valid for a certain period and certain amount of money. This can be compared to having a blank cheque that can buy you a vehicle.
Online lenders generally offer cheap car finance when compared to banks and other types of lenders.
Choose Vehicle: Once your car loan application gets approved, it is time to choose a vehicle. There are many car models in the market available with different types of features. So, it is advisable to select your car as per your personal needs and mainly on the basis of the loan amount you will get. Do not over burden yourself by selecting a highend car, as the chances of becoming a defaulter and reducing the credit score will increase in such cases.
Finalize the Paperwork: Once you have chosen your car and negotiated the price, the finance institution will coordinate with you to seal the deal. They would want your important documents like PAN card, Aadhar card, bank details, address proof, etc. So, it is important to keep those documents handy with you. Once, the paperwork is done, you will be able to lay hands on your favorite vehicle.
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Here, we have discussed all the pros and cons of each way of financing a car in India. You can choose either ways, loan or self-finance, but make sure before taking the decision you go through this article once again and consider each of these factors sincerely.