Your own car!
These three words play a very important role in the life of a middle class working person. In a country like India, buying you car holds a prestigious value and is a status symbol. Hence Banks and NBFCs offer many lucrative and attractive deals which allow customers to own their dream car instantly. With flexible EMI options for repayment, anyone can avail a car loan or used car loan.
While life moves on, you might fall into a debt trap, or need urgent money for education or medical emergencies. In such cases, there is a way that your vehicle can save you. That option is of Car refinancing.
Have you ever thought of refinancing your car? If yes, then it is important to understand few aspects that must be clear before you choose to refinance your car.
- Your car value will depreciate: Depreciation is inevitable. Whatever you buy will depreciate with each year. When you purchase a car, its value will keep depreciating with each year. E.g.: In case you bought a car worth 7 lakhs in 2016. In 2018, its value might be around 3-4 lakhs. The depreciation % depends from vehicle to vehicle. When you opt to refinance your car, the lender will decide the terms of the refinancing on the basis of the insured declared value (IDV) of your car. If the car is very old, then you might not be in a bargaining position with the bank on interest rates.
- Penalties on prepayment: When you plan to refinance, you will have to first foreclose your existing loan. Usually there are prepayment charges that you will have to pay. These charges can vary from 1-3%* and differs from lender to lender.In case you plan to refinance this loan to enjoy lower interest rates, then you must first calculate your savings on foreclosing this loan. You can calculate this by adding the prepayment charge to the old interest rate. Once you add these two charges, deduct it with the new interest rate on refinancing. If you can make good savings, then refinancing can be a good option.
- Check the reliability of the lender: How many times have we read that our credit history is important so that the bank can judge us in a nice way? While refinancing, please look at how reliable the lender is. Just because you are getting a lower interest rate from them, it does not mean you will get good service. Hence consider all aspects, check how good they are with their customer service and then compare interest rates.
- Check for hidden fees: Time and time again, we end up falling in a trap where we go for the loan by just reading the front page. Just because the bank is offering a lower interest rate, we get happy as “Lower interest rate means Lower EMI”. But that’s not all. Please read your loan application and offer documents very carefully. Look for processing charges, legal, documentation and any other charges which you will be applicable to pay once you sign the document. This will help you to truly understand how much money will be going off from your pocket.
While there are many things you must consider, these 4 aspects will help clear your mind before you decide to refinance your car. In case you happen to have any car refinance based queries, do not hesitate to contact us by Clicking Here