Opting for a shorter loan tenure works the best for the borrower ensuring that they save up on the interest costs.
With digital and technological advances, taking loans has never been so easy. A large number of people have been opting for loans to meet various expenses and fund purchases, especially with the pandemic and continuous waves of uncertainty. However, a loan is a liability, which if not handled properly could land the borrower into a huge financial debt. The same goes for a car loan – if not planned properly, the loan EMI (equal monthly instalment) could turn out to be a little too heavy on the pocket of a borrower.
Hence, experts say borrowers could take the help of a car loan EMI calculator before opting for a loan. Additionally, one should also do proper research and understand the loan before opting for it.
Here is how one can manage a car loan:
Planning the budget in advance – To start with, a borrower should weigh out all the necessary expenses and then frame a budget before purchasing a car. Industry experts say, most often people do not factor in secondary expenses that come with owning a car. For instance, unavoidable expenses such as insurance, fuel, repairs, depreciation and maintenance come along with a car.
Maintain a healthy credit score – One of the most important criteria for any type of loan. Having a healthy credit score will give an individual access to any loan with much better terms. Making timely payments of credit card due, other loans, etc. are some ways one could have a good credit score.
Type of car – Purchasing a car is not a frequent occurrence for most and, hence, naturally, everyone looks for the best deal, ponder on buying the most popular car, one of the pricier cars, etc. However, experts say while buying a car with a loan, instead of ticking all points in their car checklist, a borrower should objectively consider other models’ options, or an older make and similar performing vehicles, and save a fortune.
Large down payment – Try to make a large down payment on the vehicle if possible. Experts say, making a huge down payment while purchasing a car decreases the volume of the principal and the amount of interest also goes down – the lower the principal, the lower the EMI amount would be.
Shorter loan tenure – Banks, lenders will always push for a longer tenure for any loan, as they will benefit that way. However, opting for a shorter loan tenure works the best for the borrower ensuring that they save up on the interest costs. With a shorter-duration loan, the faster it is cleared, the lower the interest component the borrower will have to pay.
EMI payments – After taking a loan, make sure to pay the EMIs regularly, and on time. This not only keeps the credit score of the borrower maintained but also keeps the relationship with the lender maintained. Experts say one should have a disciplined approach towards any loan, which makes it easier for an individual to get faster credit disbursal in the future.