5 Common Mistakes To Avoid When Taking A Car Loan

5 Common Mistakes To Avoid When Taking A Car Loan

Nowadays, your social status is judged by the car you drive, and buying the car of choice remains a dream for many people. However, today, almost every bank offers car loans to help realize this dream. There are so many things you need to consider while taking a car loan. During the process, car buyers also commit different mistakes and one of them is overlooking the available car finance options.

This is just one common mistake, but there are various other mistakes you need to avoid while taking a car loan. Therefore, here some of the common mistakes you need to avoid.

Common Mistakes To Avoid When Taking A Car Loan

Going Overboard With Your Dreams

At times, you may get excited and tempted to spend more than what you have budgeted for. Before you make a final decision, make sure you have assessed your repayment capability. A wrong decision at this stage can really prove costly to you in the long run as the monthly installment will be higher as the buying price is also higher than the estimated.

Getting Carried Away

Often people are seen in a hurry while buying a car. There is no doubt that the excitement level is all time high and you want to lay your hands on your dream car as soon as possible. But, be patient and first decide the model which you want to invest on. When it’s about spending lakhs of rupees, make sure you don’t let emotion overpower you.

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When you are infatuated with just one model, at times, it prevents you from assessing various other cars as well. The car you are choosing may not have resale value in the future which can act as negative equity in your next car purchase. In addition, you also have chances of getting better deals on your new car, but you may lose all the savings on this trade-in. Owing to this, it is imperative you have researched the value of your current car before you go ahead and buy a new one.

Going For No Down Payment Option

This sounds interesting, isn’t it? If you have plans to take a car loan, you may be tempted by the zero-down payment offered by most of the car dealers, nowadays, to draw your attention. Well, zero-down payment means that you can take home your dream car without paying a penny. So, what’s the catch? Actually, it is more like less now, more later. A zero-down payment means that you will be paying more in monthly payments in the form of high-interest rates.

Both the car manufacturer and the dealer have fewer chances of losing money on the car. So, this type of deal actually means that they will earn money one way or the other.

Not Shopping Around

It is always better that as a car loan applicant, you have done your homework before making a final choice. While having apt knowledge about the good deals is important for a new car, arranging affordable financing also does play a pivotal role. The mistake buyers make is that they just select a car and don’t invest much time to look for the best car loan deals. There are people who blindly follow the dealer financing. 

Ideally, you should take your time to check all the available options to see what suits you the best and then go for a deal that offers the best features and interest rate for a car loan.

Concentrating Only On EMIs

You will come across loans with longer terms and smaller EMI accounts. It does not mean that if you are able to afford EMI option, then it is the best option for you. It is important you have considered various other factors such as how much interest rate you will have to pay in total before you go ahead and make a final decision solely on EMI amount. 

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