Facts about a car loan interest rate
Purchasing a four-wheeler is an aim that every individual wants to achieve in life. You consider it a sign of progress, prosperity, and growth. In India, many people also perform rituals before they start driving the car on the road. You can also get your dream car by applying for a loan and getting the best car loan interest rate.
There are varieties of car loans available in the market to suit your needs and affordability. With these loans, you can purchase your dream car without worrying about immediate payment. The standard range of car loan rate of interest is between 12% to 15% though it may differ, depending on the bank and broader market conditions. They usually have a fixed interest rate, where you pay one rate for the loan’s entire tenure.
Many banks give up to 100% of the new car’s invoice value. However, when calculating how much interest to pay, you must also remember that you have other expenses like insurance, registration charges, and processing fees on loan, among others. You can also use the car loan interest calculator to estimate the interest and EMI payment towards the loan.
Most banks and lenders provide online tools that help you calculate your loan cost. You must input your loan amount, loan period, and interest rate to know your interest costs immediately.
When you buy a car of your choice after applying for a loan, the lender holds it in hypothecation as security. Till the bank or financial institution does not receive the entire loan amount, including repayment of car loan interest rates, it holds your vehicle as security. Ensure to pay the loan amount with interest on time to clear all the debts. You need to pay it in equated monthly instalments with interest over the loan tenure.
Very often, the interest rate charged on loan depends on your credit score. The higher the credit score, the lower is the interest rate offered. If you have a high credit score of 750 or above, it symbolises that you are a responsible applicant who repays on time and a low-risk customer. Banks will offer you attractive rates of interest as they know there is a low chance that you will default on the loan.
If you plan to apply for car loan and wish to avail of the lowest car loan interest rate, make sure you obtain your credit report and check your credit score. If your score is below 750, you should improve it before applying for a loan. You can do so by repaying all the existing debts and credit card bills. You should check the credit report and rectify the mistakes. Opt for a longer tenure when applying for a loan to get a lower EMI and increase affordability.