With shutters rising and the route to normalcy getting clearer, the commute has begun in full swing. Owned cars have now become a go-to option for safe travel.
However, continuous waves of uncertainty and a lower pace of growth make us all want to cut those redundant expenses that we might make, including our loan liabilities. Here are a few ways you could cut the cost of getting a loan for your car.
1. Research about loan options and lenders
Consider shopping for your car loan by getting information from multiple banks and other places to get the lenders’ best quote and terms. The NBFC from a car manufacturing company can provide excellent loan deals that can help you save money. However, the dealers involve middlemen who get paid from your pocket.
2.Do not borrow smaller amounts
Smaller loans are paid off faster by borrowers, allowing lesser interest earnings for the lender. Banks charge much higher interest rates on smaller loans than those of significant principal amounts to compensate for this. Hence, when buying a car, if you need a lesser amount, try to save up for the shortfall instead of going for a loan (unless it is an emergency purchase).
3.Refinancing/ restructuring option
If you feel you’re in a better position with your credit score, or if the economic conditions significantly changed from when you took a loan and now refinancing to get better interest rates and tenure makes perfect sense. Refinancing means getting your loan agreement modified for more favourable terms. This can massively reduce your loan expenses and, thereby, the EMI amount. Check the interest rates and the resultant outflows beforehand using a car loan eligibility calculator to plan better.
4.Loan pre-payment
If there is a chance that your income for a certain period is going to be higher than usual, use it to pre-pay your principal loan amount. Pre-payment of a car loan will help you bring down the principal amount and the tenure as well, and thereby the interest that you will pay on it.
5.Negotiate processing fees, if not the interest itself
An unexplored component of car purchase is the processing fees bit. Hence, if the lenders seem rigid about interest rates, it might be easier to negotiate processing fees with your dealer, leading to a significant reduction in your loan costs. In case you opt to take a loan given by NBFCs partnering with your car manufacturers or dealers, there are chances that the negotiations on processing fees might be favourable. This is because it is a win-win for the dealer as well as the lender.
6.Bigger down payments
Try to put a significant down payment on the vehicle if you can afford it. This would continue to decrease the volume of the principal, and the lower the principal, the lower your EMI would be.
All in all, you can save money on car loans in a lot of ways. The easiest way to figure out how much you will have to shell out per month in order to pay off your debt is to use a car loan EMI calculator. This will help you, according to your repayment ability, to handle your car loan.
