The feeling of owning your own car is an experience which a common man cannot forget. Today, many can buy their own car just by applying for an instant loan. New cars are always costly and might not fit into your budget. But there is nothing to worry about. If you cannot buy a new car, you can always apply for a used car loan and get a second hand car of your choice.
The used car loan application however has many pointers which you need to finalize before signing it. You need to do your research well on the car’s history and also your loan options so you can get the best deal. While doing so, we have noticed 4 such mistakes that first time loan takers go through while applying for a used car loan. We have listed these mistakes below. These will help you understand the 4 issues you will face if you are not careful while taking a used car loan.
Selecting a longer tenure is not good
Everyone who takes a loan will focus on taking a longer tenure. This is because it reduces their EMI burden and they can repay the loan with ease. What you don’t realize is that a longer tenure would also mean that your interest burden will rise. This will mean that you will pay a higher amount as compared to a loan with a shorter loan tenure.
If you focus only on EMI, it doesn’t mean you’ll pay less
You might find that the EMI deal is amazing and will end up choosing that option. But focusing solely on the EMI will affect you in the long run as you will pay a higher interest amount. Apart from a higher interest amount, the total amount which you will pay by the end of the tenure will be very high.
Not paying any down payment is bad
People who want to buy a car, apply for the loan amount which will let them buy the whole car without them having to pay anything upfront. While this would allow you to get the car quickly, it would also mean that you will pay a higher amount as EMI. You can simply avoid this by going with the down payment option. If you begin this process with a 10-20% down payment, which would effectively reduce your EMI and interest burden immediately.
Not deciding a budget for the car will hurt your pockets
One of the major mistakes made by the common man is lack of discipline with the budget. The common man does his research but it is often not enough. When they go to check out a car model, the sales team offers good deals and attractive discounts on a higher car model. These offers make the common man forget about his budget and he loosens his purse. This will then affect his savings/EMI payments etc.
The common man must not only research about loan offers but also about the car model they want. It is important to calculate what kind of interest you will repay with the EMI. Once the calculation is done, you can accordingly apply for the best used car loan by comparing the interest rates of different Banks and NBFCs in India.