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Thursday, 5 March 2015

All You Need to Know About Car Financing

Owing a car, especially in today’s day and age, has become more of a necessity. In a country like India especially, buying one is the second most expensive purchase that most of us would make, second only to our home. In all probability, the price of the car you’re considering will be a tad out of your budget, and realizing this there are a lot of financial establishments who come up with car financing options to enable to you to buy the car. These days you could apply for car finance online and even if you choose to go the traditional offline way, you would only need basic documents like proof of id, address, income, etc.

So what is Car financing? Simply put, it is a form of secured loan where you provide your car as collateral. As far as the actual loan amount is concerned, it is calculated based on factors such as current value of the car, the type of car, value of the car is the second hand market, deprecation rate of the car, etc. Most financial establishments will however, offer up to 100% of the on-road cost or at least 90% of the ex-showroom cost.

Moving on to repayment tenure; car financing companies normally set the repayment tenure between 1 to 5 years. As far as EMIs are concerned; the lower the repayment tenure the higher the EMIs tend to be and vice versa. Now, what if you default on default on a payment? Most establishments will let you to default up to two payments. Any more than that and they can have the right to seize your car. Loan defaults have a direct impact on your credit rating, which then makes it extremely tough for you to apply for a loan in future.

Moving to interest rates; you can choose between a fixed and variable one. Also, considering how popular car financing is, financial establishments have extremely competitive interest rates. You can also negotiate the interest rate and try to bring it down. Typically, if you are a devoted patron of a particular financial establishment, they will lower their interest rates for you.

Now that you have a better understanding about car financing, it is wise to go ahead do through research to see for yourself what car finance option best suits your needs.

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