Is there a particular car you saw on road and couldn’t stop gazing at it? Or one car you have been wishing to own since the longest time?

Buying a car in India was a matter of status symbol for very long. To an extent it still is, but the purchasing pattern is transforming. It is more based on needs and the purchasing power as against what was in the past.

Car is the second most aspired asset after a house for many. It is more of an emotional decision and a financial, as against in the US it is a commoditized decision. And Goods & Service Tax has added one more reason for the buyers to cheer. Automobile companies have reduced the prices and might offer many such offers this festive season. Additionally, with Independence Day and a sequence of many festivals anticipated in coming few months will give you many reasons to boost your excitement.

However, buying a car shouldn’t be personal choice but a unanimous choice of your your family, taken with enough care. So, before you start your car research, have a look at your own financial health. Check your credit worthiness and eligibility to buy a car loan. Understand the purpose of buying a car and bear few necessary points in mind.

What are the factors to look at?
 

1. Interest rate
   
   When you take a loan, the interest outgo is one of the vital deciding factors. The interest rate you would pay depends on a variety of factors: type of vehicle you wish to buy on loan, your credit worthiness, risk profile, tenure of the loan, whether you’re a salaried individual, self-employed, priority banking customer, among other things. The interest outgo would determine your EMI and has a bearing on your budgets and long-term financial wellbeing.
    
2. Processing fee & other charges
   
   Buying a car loan does not stop with just interest rates; there are processing and other charges levied by lenders. The processing fee is the one-time fee charged as a certain per cent of the loan, but capped at an ‘x’ amount. Some lenders levy a fixed processing fee. A higher processing fee impacts your total cash outflow while availing a loan.
   
   As regards the other charges, they include: prepayment charges (also known as foreclosure charges), part-payment charges, late payment penal interest, loan cancellation charges / re-booking charges, cheque bounce charges and so on, all of which you should examine carefully.
    
3. Loan Tenure
   
   The maximum tenure for a loan car is usually between 5 to 7 years. A higher tenure can reduce your EMIs, making repayments comfortable, while opting for a lower tenure (of say 3 year or 5 years) increases your EMI.
    
4. Repayment flexibility
   
   Apart from the above pivotal aspects, assess if the lender provides you with the flexibility to repay your loan sooner, and at what cost does this come at. This flexibility can help you prepay the loan ahead of time, as well as provide a relief in distressing times. However, it’s best to adopt financial discipline in order to repay loans on time and maintain your financial health in the pink always.
    
5. Customer service
   
   You want to buy your dream car with a smile on your face, don’t you? So, ensure that the customer service at the lender has high standards. This service can even help keep track of your loan, allow you to be in better control of your personal finances. Remember, while lenders will have varying customer service standards, there are some basics of good service that are universal.
    
6. Terms & conditions
   
   Make sure you read the terms & condition carefully to make an informed choice. This will avoid issues later and ensure a pleasant, hassle-free experience.
    

Availing of a car loan carries the following benefits

• Your existing finances are not exhausted and the loan can be worked out to suit your budget, facilitating you to save
• You don’t have to touch your existing investments assigned for other important financial goals such as children’s future (their education and marriage needs) and your own retirement
• You don’t have to mortgage your existing assets; because a car loan is a secured loan (secured against the car itself). Meaning, until the loan is repaid in full, the lending institution/bank has right of lien on the asset, which confers upon it the power to seize the asset and recovering the dues by selling the vehicle.
• You have the opportunity to own the car and spend the happy moments with your family while you service the loan
   

Remember, paying upfront in cash could put you under the Income-tax department’s radar, more so after demonetisation. But, paying an upfront amount to the extent of the required down payment is perfectly fine.

Before you avail for a loan…

• Know your finances precisely – Follow the much needed discipline to keep your debt-to-income ratio healthy (Ideally, your monthly debt commitment should not exceed 40% of your gross income.) Make sure you aren’t compromising and jeopardising your long-term financial goals and also, do not let this strain your current lifestyle to a great extent.
   
• Have a repayment plan in place – Ascertain the loan repayment schedule and have a repayment plan in place so that you don’t miss any EMI/s and end up paying a penalty.
   
• Ensure you hold adequate insurance – As a bread winner, while you endeavour to do the best for your family, insure yourself optimally. The insurance money can aid the financial security of your family members and pay the outstanding loan.
   
• Keep your family in the loop – When you’re planning to avail a loan, make sure you discuss it with your family. Sharing your rationale with them will keep them well-informed and their opinions will help you gain a better perspective. Even it is a surprise, keeping your family in the dark may not be in their best interest.
   

Buying a car is life milestone. And today, owing a car is no longer a luxury, but a comfort that is within one’s reach with attractive car loan facility. So, bring in the joy and comfort that your family is yearning for. Happy driving!  

You can also access Personalfn Car Loan Calculator here.

Here is the Roadmap laid for you to avail a car loan.

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