When you choose to ultimately purchase the car of your dreams, you’re already bubbling up with so much excitement that it becomes a little hardto focus on other important details involved in the process.
Handling your Car Loan is one of them. To make the process of getting a Car Loan and repaying it successfully slightly easy, you first need to choose the right loan, Here we discuss 9 hidden tricks for managing your car loan. so let’s read
1. Understand your budget
A car loan is becoming accessible for everyone, but it is crucial to understand the number of cars you are opting for. It will help you manage the car loan in easy ways, and you can prepare the repayment plan based on your earnings. Always prefer the amount based on your budget and expenditures.
The loan repayment tenure is crucial to make a budget plan that gives you the idea to pay for the loan. An online EMI calculator can also help you get the right options to apply for the loan.
2. Choose an affordable car
Some car dealerships and car lending companies advertise for luxury vehicles that seem affordable to finance. Generally, this happens when the loan term is extended for a long time–The monthly repayments are distributed over the course of the loan, which makes it seem friendly on the budget.
What you may fail to consider is that while the repayment amount is low, you would be making the repayment for a very long time, monthly interest and maintenance fees included. Additionally, many car experts advise against taking out a car loan with a term that’s longer than 7 years because new cars depreciate in value fast.
3. Make a Considerable Down Payment
The golden rule to ease any upcoming pressure is to start early. This comes in handy also while applying for a car loan. Opting to make a bigger down payment, even if that comes from your savings has future advantages. It reduces the need to apply for a higher loan amount, and a more significant down payment reduces the outstanding debt.
Further, a lesser balance amount makes it easier to repay the loan. An added advantage of making a sizeable down payment is that it will encourage you to pay the debt in a shorter span of time, which will facilitate better car loan management.
4. Interest Rates and EMI
You should be clear about the interest rates and the consequent EMIs offered by banks. A low-interest rate might not be the best idea especially in the case of long loan tenures.
It is better to do some research in advance and use a free online car loan EMI calculator to estimate your overall interest outgo before signing up for a specific car loan. Doing this research helps you to better plan the tenure and overall repayment amount without getting into any financial problems at a later date.
5. Debt Consolidation
This is a way to manage your car loan along with your other debt obligations such as a personal loan or credit card debt if you are finding it difficult to manage your existing debt. Consolidation allows you to turn all your different loans into a single large loan and gives you the freedom to pay off just one loan EMI every month.
This process is highly convenient as you do not have to keep track of different loans, their EMIs due dates, and the paperwork that comes with them. This also makes the repayment process easier and reduces your chances of missing out on the due dates.
6. Maintain a healthy credit score
One of the most important criteria for any type of loan. Having a healthy credit score will give an individual access to any loan with much better terms. Making timely payments of credit card due, other loans, etc. are some ways one could have a good credit score.
7. Refinance your loan
Did you discover a more affordable car loan program from a different lender a few months after owning your car? Did your credit score improve one year after taking out your loan?
With car loan refinancing, you can get rid of your existing debt and pay a lower interest rate on a new auto loan. You can also reduce your car loan or switch to a fixed-rate or variable-rate loan by refinancing your loan. Since your car depreciates in value as the year goes by, make sure to refinance only when your loan is still “right side up”.
8. Choose a Shorter Tenure
Another smart method to manage your car loan is to come down in favor of shorter repayment tenure. Banks that provide loan facilities often charge lower interest rates for loans with a shorter tenure. This would also mean that you would be required to pay relatively more EMI,
but the stress of a continuing loan would be off your shoulders in a shorter span of time. Paying off the debt as soon as possible not only relieves you of the loan but also instills an increased sense of ownership of the car you just purchased! However, if choosing a longer repayment term seems more suitable, the benefit includes a lower EMI amount to be paid over a longer period.
Conclusion: It is important that you plan your budget and loan repayment before taking on a car loan. Using a car loan EMI calculator is the best method to find out how much you will have to shell out each month in order to pay off your loan. This will allow you to manage your car loan according to your repayment capacity. It is also advisable that you do your research on the key terms and conditions of the car loan like eligibility criteria, processing fees, etc.