5 Mistakes to Avoid When Taking a Car Loan

In today’s day and age, the car an individual owns tends to define their social standing, and buying the car of choice remains a dream for many. But nowadays, a number of financial institutions provide car loans to help realize that very dream. There are of course a number of things that one needs to consider before they select their car loan. Concentrating on the best deal for a new car, people often forget to think about the best deal for a car loan. A very common mistake that people make is of choosing the car before analyzing the available finance options. Choosing the car first tends to make people more susceptible to accepting less-than-stellar loan deals. Some of the common mistakes that one needs to avoid before choosing a car loan are:

Not Selecting the Shorter Term

Spreading out a loan over a longer period of time ensures lower monthly payments, but in the end you will just end up paying more than what was necessary in terms of the interest. When applying for car loan, try to choose the shortest term that you are comfortable with to minimize interest outflows and maximize loan benefits.  Use the automated EMI calculator available on the Paisabazaar website to find the most suitable option for you. That said, with the large number of loans available in the market today, it should not be too hard for you to find the one that is perfect for your needs.

Not Shopping Around

As already mentioned, the smartest thing that a prospective car loan applicant can do is doing his/her homework before selecting a vehicle. While tracking down a good deal on a new car is very important, it is even more so, to arrange reasonable and affordable financing. More often than not, buyers focus mainly on finding a car and do not take enough time to shop for the best car loan deal. Then again, there are those who jump at the mention of dealer financing. The fact however, is that one should always check all available options to see who offers what benefit and then select a deal with the best interest rates for car loan and features that suit the loan applicant’s scenario.

Focusing only on the EMIs

Some loans have longer tenures and smaller EMI amounts. Just because the EMI sounds affordable and reasonable does not mean that it is the best option for you. Make sure that you look at the big picture such as how much interest you are paying in total before you make a decision based solely on the EMI amount.

Selecting the “No Down Payment” Option

Not having to make a down payment on a car sounds very tempting. It means that you can drive away your new machine without having to pay a single rupee. This deal is exactly what it seems like – a gimmick to lure shoppers. The fact is that this deal is more like a ‘less now, more later’ deal. Zero down payments basically implies that you will be paying more on  future EMIs resulting in a higher interest outflow. Moreover, there are also hidden charges and fees that people generally forget to factor into this equation.

Going with the ‘Gut’

There are instances when you have an iron clad limit to the financing that you want to go for. But, sales talk is designed specifically to break down that resolve. A number of deals or offers might be offered to you and you might find your resolve slipping because it’s just about a little more money. Sometimes, excitement may make you stretch your pocket and buy a car for which you have to spend a little more than your original budget. Going with the ‘gut’ might be a great option for many situations, but not for car loans. Assess everything in a logical manner and keep your emotions in check.