Thinking of buying a car? 5 things you should remember while taking a car loan

Do not stretch yourself financially in your bid to buy a car. Make sure that your monthly car EMI payment is not more than 10-15% of your total income every month. Do not make this decision in haste, since buying a car is a long-term commitment, and could impact your overall budget for several years.

Source: September 22,2023, ET Wealth

To avail of favourable terms for a car loan, a good credit score is very important. You should check the credit score through a credit report generated by a credible credit rating agency. A good credit record of paying EMIs and credit card outstanding bills on time typically helps improve your credit score.

The higher the term of the loan, the more time one gets to repay. One should also consider the interest rates charged by different lenders. Even a small difference in rate can make a significant impact on the total borrowing cost.

It is very important to check the provisions applicable for prepayment and pre-closure of the loan. Lenders usually levy charges/penalties for pre-closure of the loan. Make a thorough comparative study across various lenders to arrive at a suitable loan.

Lenders may want the buyer to purchase a comprehensive car insurance policy to be able to avail of the car loan. This insurance cost should also be factored in while making the loan decision.