As opposed to the age-old notion that buying a car is a luxury, owning a car has rather become a necessity in recent times. With the rise in disposable incomes and a plethora of car loan options available to suit every need of the customers, car sales have increased exponentially over the past couple of years. However, managing a loan is a task that is easier said than done. An individual must ensure that he or she is punctual in its repayment otherwise he or she might default. If a loan is not paid on time, it negatively impacts the borrower’s credit score and diminishes the chances of another loan approval in the future. See the list below to learn about the ways you can manage your car loan EMI so that the chances of defaulting decrease.
Take account of all your debts Before opting for a car loan, the first and foremost thing that a person should do to ensure that his or her debt is repaid on time is to make a list of all the existing loans and the total amount that needs to be paid each month as monthly installments. This should be done to ensure that the total amount for EMIs doesn’t exceed 50% of the monthly income of the candidate.
Carry out an intensive market research for the best offer There are numerous lenders that provide additional offers to their customers on car loans. Performing a thorough market research will not only help you select the best scheme according to your needs and situation, but will also assist you in finding any additional ongoing offer in the market. By doing an online search, you can compare the interest rates offered by various banks and NBFCs and choose the one that has the greatest benefits.
Choose a scheme with a low EMI A higher rate of interest translates into a higher amount to be paid as EMI. Therefore, you should perform thorough research of the market and find a plan with a low interest rate and short repayment tenure. You can also increase your loan tenure to reduce your EMI amount. However, it should be kept in mind that increasing the duration of the loan might lead to a higher amount of interest in the long run.
Calculate your EMIs beforehand In addition to increasing your chances of loan approval, calculating EMIs before applying for a car loan can prove to be beneficial in a number of ways. EMI calculators give the customers the opportunity to plan their loans better by adjusting the quantum of loan, repayment tenure, and rate of interest. This not only helps the applicant choose a plan with an EMI that is less than or equal to his or her disposable income, but also helps him/her decide whether opting for a down payment might prove to be beneficial or not.
Opt for a good car loan When you choose to avail a car loan to meet your imminent financial requirement while buying a car, it is crucial to determine whether it impacts you positively or negatively. In addition to offering tax benefits, a good loan is one that increases the value of the purchased item over time. Furthermore, if a person avails a good loan, he or she will get sufficient returns from the product in future to match the total amount that he/she has borne.
Choose a car loan with prepayment option A number of banks and NBFCs offer a loan prepayment option for the benefit of their customers. If you are facing a sudden influx of cash, you can use the money to prepay a large portion of your debt. Prepayment of loan will not only help you decrease the duration of your loan, but will also notably reduce the amount of interest you have to pay towards the loan. However, please be informed that many lenders charge an additional fee if a customer decides to repay the loan before the predetermined tenure.
Be punctual with your EMI payments When you do not pay your car loan EMIs on time, you might be charged a late fees as a penalty. Additionally, defaulting on the payment of the monthly installment of a loan also leads to a bad credit score. This might have a great impact when you apply for another loan in the future. Therefore, you should be careful not to miss or cause any delay in the payment of an EMI.
Strategise your repayments in case of multiple loans If you already have one or more existing loans, you should be extra careful while getting a car loan, or any other loan. When you take an additional loan while already having existing debts, you should plan and repay your loans wisely so that you do not end up defaulting. Payment of loans that have high interest rates should be prioritised while focusing on loans that are secured and offer tax benefits.
Make a change in lifestyle if necessary Loans are financial benefits and ensuring the timely payment of an outstanding debt is the responsibility of all individuals. Customers can make some lifestyle changes, if needed, in order to handle their expenses better and repay their monthly installments on a timely basis.
A good car loan is one that not only helps you during your financial crisis while purchasing a car, but also increases the value of your car over time. Before decide to you dive head-first into a car loan scheme, you should do proper market research to find the plan that suits your requirements and helps you save money in the long run. Choosing a car loan with a less EMI amount and short repayment tenure in addition to opting for a scheme with a prepayment option can help you maintain your finances properly while ensuring that you can repay your debt in time without having to pay a large amount as interest.
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