Tips and Tricks for Managing Car Loan

In modern life, cars have become a necessity and that is one of the main reasons why car loans have grown more and more popular throughout the years. However, while trying to achieve one’s dream of getting the best car loan offers for themselves they often forget to plan adequately before opting for a car loan. But before getting a car loan approved one must pass the car loan eligibility test taken by the banks. In the bellow section, we will discuss some tips and tricks that will help an individual to manage a car loan so that they can pay it off with ease.

Down payment

This is where many first-time car buyers make mistakes. By only making a small down payment one might be able to see the upfront cash saving benefits but if one uses the long-term picture it is not so easy. A small amount of down payment can cause various adverse effects on the car loan interest rate, car loan tenure, and payable EMIs. It is often advised that if possible one should try to make a larger amount of down payment while they take a car loan rather than paying the minimum amount. This automatically reduces the quantum of the Car Loan and generates savings by extension in terms of the total interest payable over the loan duration. It might seem like a large expense at the outset but it will eventually help in one’s hard-earned money and make the loan repayment process much smoother.

Interest Rates and EMI

One should always be clear about the interest rate and consequent EMI offered by banks and non-banking financial companies. A low-interest rate may not be the best idea, especial in the case of long-term loan tenure. It is better to do some research beforehand and utilize a free online EMI calculator in order to estimate one’s overall interest outgo before they signup for a specific car loan. Doing the research work will help an individual to plan a better loan tenure and overall repayment amount without getting into any financial crunches in the future.

Tenure

A borrower should always choose a shorter loan tenure if they can manage it without overstraining their monthly budget. There is often a miss concession amongst the borrower that the loan tenure is independent of the loan amount and rate of interest but the truth is somewhat different. A longer Loan tenure might decrease the EMIs of the individual but eventually, they will have to pay more money as interest over the loan period. On the other hand, a shorter loan tenure might increase the EMI payment of an individual but the borrower will end up paying less money as interest over the entire loan tenure.

Transferring the Car Loans

If an individual is facing a problem by settling an existing debt due to high-interest rates or EMI and then they might have the option to restructure or transfer their existing car loans. Restructuring a car loan means That The bank will alter the Car Loan Interest Rate and loan tenure according to The individual’s repayment capacity. Apart from the fact the bank may not grant him or her the option of restructuring, a restructured loan will cause a substantial dip in his or her credit score. One can also transfer their loan to another bank that is offering them a lower rate of interest on their outstanding principal of car loan.

Debt Consolidation

This is another way to manage one’s car loan along with their other debt obligation such as personal loans or credit card debt if he or she is finding it difficult to manage their existing debt. Consolidation allows an individual to turn all their different loans into a single large loan and gives them the freedom to pay off just one loan EMI every month. This procedure is highly convenient as one does not have to keep a track of different loans, their EMI’s due dates, and the paperwork that comes along with them. This also makes the re-payment procedure easier and reduces the chances of missing out on the due dates.