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How to Select a Car Loan?

Majority of people who purchase cars do not have the entire amount to buy the car in one go. They usually take car loans to finance the entire purchase or part of. But to choose a car loan is equally taxing and important as choosing a car. Usually, the process to choose a car loan is methodical and has to be done step by step.

Be aware of your needs:

You should always elect that car loan which is suited to your purpose. This requires that you need to be aware of your needs and your family's needs. At this starting stage you need to ask yourself some questions -

»  Am I looking for a new or used car?
»  Do I need and want a big car or a small, fancy sports car?
»  Am I looking for a car that is reliable and safe?
»  What about fuel consumption and mileage?
»  Can I cut down on luxury expenses to buy a car?
»  What is my financial situation?

Features to select a car loan:

Shop around online looking for best car loan deals offering you suitable interest rates. Check out at least two online car loan websites.

The website of your bank where you have your checking account

If you belong to a credit union, ask about their car loans. Credit unions typically charge a slightly lower interest rate than banks and have more lenient approval guidelines.

The website of your car dealership You need to be aware of car loan jargon - be sure of the difference between an offer and a proposition - is the rate of interest being offered, fixed or variable? Specifically you need to ask yourself these questions before deciding to select a car loan.

»  What interest rate can you afford to pay?
»  What is the term (repayment period)?
»  What down payment will you make?

Financing through the car dealer or manufacturer may be a convenient option. But you have to careful of all the term loans. You need to clarify any ambiguous terms and have everything on paper.

Secured or Unsecured car loans:

Most dealerships prefer an unsecured personal loan which allows a variable or floating rate of interest. But this can be disadvantageous to the applicant. It spikes up the EMI amount and you end up paying more than the actual price of the car. A safe option when deciding to take a car loan is to go in for secured personal loans. They lower your interest rates as you are bound to make regular payments to keep control of your collateral.

Credit Score and EMI:

The option to elect a car loan is heavily dependent on your credit worthiness. Check your credit score before venturing into the car loan arena. This can be done for a small fee online through major credit bureaus. A good credit score lowers your interest rate and also gets you easy EMIs. In contrast a dicey credit report might get you the loan but at a higher interest rate.

Features to select a car loan may vary depending upon the personal choice of the applicant.

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