Buying a car of your own requires careful planning and effort. A car loan is the best financial instrument to fund the purchase of a car. It enables you to buy a car of your choice which has to be paid for in easy monthly installments. You can choose the repayment tenure, and the EMI amount, and you are all set to go. However, it is important to keep in mind that assets such as cars may depreciate with time. Therefore, maintaining your car loan is as essential as managing your car. Here are a few relevant tips and tricks to help you cruise through the car loan repayment :
1. Set Out a Budget
It is a cherished age-old value to always frame a budget before making a purchase, and opting for a car loan is no different. Take the first step and carve out an outline of your daily and necessary expenditure, keeping some money aside for unforeseen emergencies. Weigh these along with the upcoming expenses after you buy the car you are taking the loan for. This means that you need to account for other costs that you will incur in the future such as fuel, car insurance, and regular maintenance in your budget. This enables you to plan for the proceeding months more appropriately so that your finances are not strained when the EMI tenure commences. Also, make sure your EMI is not more than 15% of your monthly net income. This would help you maintain your savings while simultaneously paying your EMI.
2. Make a Considerable Down Payment
The golden rule to ease any upcoming pressure is to start early. This comes in handy also while applying for a car loan. Opting to make a bigger down payment, even if that comes from your savings has future advantages. It reduces the need to apply for a higher loan amount, and more significant down payment reduces the outstanding debt. Additionally, a lesser balance amount makes it easier to repay the loan. An added advantage of making a sizeable down payment is that it will encourage you to pay the debt in a shorter span of time, which will facilitate better car loan management.
3. Choose a Shorter Tenure
Another smart method to manage your car loan is to come down in favour of a shorter repayment tenure. Banks that provide loan facilities often charge lower interest rates for loans with a shorter tenure. This would also mean that you would be required to pay relatively more EMI, but the stress of a continuing loan would be off your shoulders in a shorter span of time. Paying off the debt as soon as possible not only relieves you of the loan but also instills an increased sense of ownership of the car you just purchased! However, if choosing a longer repayment term seems more suitable, the benefit includes a lower EMI amount to be paid over a longer period.
4. Be Punctual with EMIs
The payment of the chosen EMI is to be regularly made. Disciplined payment of the EMI takes you closer to fully owning your dream car and also facilitates a healthy credit score. In case you miss an EMI, or delay its payment, the interest rate accumulates till your next repayment date, and that may become a budget issue. This not only increases the due amount but may affect your credibility with the lender. Timely and regular payment of the EMIs considerably increases your credit score with banks, leading to a faster processing and disbursal of loans in the future. Your dedication does pay off well, not just in the present in the form of a car that you own or the duly repaid loan amount, but for all future loans.
5. Consider Debt Consolidation
We all undergo troubling times where meeting our daily requirements may seem difficult. Moreover, when we seek financial assistance to cater to a few of our needs, we might end up paying more than one EMI per month. Keeping the cumulative EMI amount payable per month under 50% of our monthly income, too, may seem tough. This may further increase the financial constraint which the loan was supposed to ease in the first place. In case you are already squeezing out EMIs for your previous loans, and are planning on applying for a car loan, you may consider consolidating all your loans into one. It eases your calculations, keeping loan repayment as simple and hassle-free as it supposed to be.
6. Keep in Touch with Your Bank
It is essential for a banking customer, especially a borrower, to be in constant touch with the lending bank. There might be another financial emergency that needs your special assistance for a month or two, making you postpone your EMI payment. It is best to get in touch with your bank and notify them of the same. It generates mutual trust and enhances your financial credibility. The probability of missing an EMI and informing the bank about it beforehand may also be beneficial in terms of advice you may receive from your loan expert at the bank. A dialogue always results in solutions.
With the points mentioned above, applying for a car loan and maintaining it would seem even easier than before. Due diligence, the right payment method, regular repayment of the loan, and a suitable insurance plan coupled with assistance from the bank would enable you to manage your car loans with no difficulty whatsoever. With considerable technological advancements in the banking sector, you may also apply for loans online, from the comfort of your home.
This Content has originally written by Yes Bank Team. No Copyright/IPR breach is intended.