Used auto loans
Do you have plans of buying a car in the recent future If so, beware of advertisements and brochures that make you more confused. This article helps you to choose from the best used auto loans options available and lets you know various nitty gritties that you may not be aware of. Take a tour through the detailed guideline for getting auto loans.
How much loan you can really take There is nothing called a 100% loan. Though some financiers have schemes for providing cent percent car loan, but there are certain catches in such schemes. In such cases, there is either an involvement of advance EMIs or a certain amount is required to be kept with the bank as deposit. So be sure about what you are getting out of your auto loan.
There is more to just paying interests
Interest rates are not the only factor for consideration. Never rush to take an auto loan just because interest rates offered are apparently low. Check the loan amount and parameters before opting for a particular loan scheme. Compare a few schemes offered by different finance houses and make a note of the processing fees and the EMI (equated monthly installments amount).
There are nothing called "flat interest rates", so avoid them and ask your financer thoroughly before you opt for anything like this. You should calculate the effective interest rate of auto loans based on cash flows. Often, interest rates turn out to be higher if it is calculated in this method rather than the normal method, which include annual reducing balance, monthly reducing balance etc. This happens because; unlike methods such as Annual, Monthly Reducing Balances the loan principal does not get adjusted with EMI payments. You should also consider the processing fees, which usually range from 1% to 3 %.
In Fineprint
Before you go for an auto loan, get to know everything about the hypothecation of your vehicle from your financier. This would include your scrutinizing the loan agreement and signing the same. Stamp charges would be levied on the transaction. You should definitely not forget to get hold of the copy of the loan Agreement and read the fine print. So before you go for the used auto loans, just be sure of what the loan agreement says.
What about the pre-payment charges
Make sure that you are given the option of prepaying your loan if you want by your financer. This is very important. One must be given the option to prepay some part of the loan if he or she wants to. This would mean more savings for you, as the outstanding principal amount would be reduced after you prepay as much as you can.
Whats the Depreciation Factor
In case you are thinking of opting for auto finance, check out for claim depreciation. You can claim depreciation, only if you buy as an individual. If you lease out the vehicle after buying it, the financier will get the right of claiming the depreciation. In order to get a feel of the EMIs, you have to first get to know about the amortization schedule.
Your EMIs
Whenever you take a loan, be it auto, home or personal loan, checking out repayment period is very important. Just be doubly sure that your account has enough money to pay off the monthly EMI. See to it that your timing of payment is after your salary has been credited.
Look for special discounts & longer duration
You can always negotiate the final rate of interest and also look out for more benefits. Its possible to do this, as financers face huge competition as well. Explore the different discount schemes on auto loans offered by banks and other institutes.
Go for a longer tenure loan, if higher amount of repayment look threatening to you. Usually car financing is available with the repayment period extending from a minimum of 1 year to a maximum of 7 years. However, it is advisable to go for lesser number of years for borrowing, as the more the time for repayment, more the interest payable.
When to take an Auto Loan
If you have decided to take an used auto loans then take as low an amount as possible: because, ultimately you have to repay with interest for each every dollar you borrow. Yet a loan is supposed to assist you financially and help you purchase the product that you are otherwise unable to buy with your own cash spending. In case of buying a car, if you are not in a position to pay and yet dream of owning one, a loan will certainly help.
Be acquainted with some numbers
You can usually get an auto loan up to 80% of the cars demand price. Eg: So lets say if the car costs $2.5 lakhs, the maximum amount of finance that you would get is for $ 2 lakhs (as per the 80% calculation). Assuming duration of the loan is 5 years and interest rate equal to 16%p.a., you will have to repay $ 4800 approximately under the monthly reducing balance method.
In a nutshell, going for an auto loan is a good option, if you want to buy a car and yet are not in a position to finance it on your own. There are many banks and institutes, who offer auto loans at competitive interest rates. Its just a matter of picking up the right financer who will give you the best and rate of interest for your loan. The article is just a checklist of things that you need to follow before you surely go for an used auto loans.
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