Applying for car loan? 5 things to keep in mind before signing agreement

Car Loan

Is buying a new car on your wish list? Financing a new car is easy if your credit score and income match the eligiblity criteria. You should select your car loan smartly as it can make a huge difference to your borrowing experience and help you save money. Here are 5 things to keep in mind when applying for car loan.

Assess your financial standing

Before diving into car loans directly, its best if you take a good look at your finances. Check all your income sources-salary, bonuses, investments.

Know your credit score

A credit score is basically an indicator of your ability to repay debt. Based on your credit history and repayments, your credit score is calculated which is a proof of your creditworthiness. Your credit score is what the banks use to determine how likely you are to make timely and complete loan repayments.

Understand Loan Terms and Conditions

Understanding all of the terms and conditions of a car loan is crucial before committing to one. This covers the interest rate, length of the loan, amount of the Equated Monthly Installment (EMI), processing costs, penalties for early repayment.

Consider Making a Down Payment

Even if a loan can be used to pay for the entire cost of the car, there are a number of advantages to making a down payment. A down payment is an upfront contribution, usually stated as a percentage of the total cost, made towards the purchase price of the vehicle.

Read the Fine Print

It is imperative to read the fine print of the loan agreement to understand all the terms and conditions. Go through the clauses, loan tenure, EMI payments, prepayment penalties, processing fees, and other hidden fees.