Buying a new or used car is made easy and simple by opting for a car loan. There is an abundance of car loans being offered by various lenders. However, due to a lack of knowledge, many borrowers end up making the wrong decision and end up regretting it later. Here’s a look at some common mistakes borrowers make while applying for a car loan.

 

Not Conducting a Due Diligence
Many first-time buyers make the mistake of simply considering the loan provider suggested by the dealer. You must carefully evaluate the terms and conditions of each loan product before arriving at your decision. Repayment terms, rates offered, paperwork involved, cost of borrowing, are all important considerations that need to be thoroughly understood and compared.

 

Focussing Only on the Interest Rate
Borrowers use the rate of the interest as the only criteria to compare loans. While the interest rate is a big factor, it does not show you the actual cost of borrowing. That is understood using the Annual Percentage Rate (APR). The APR includes the interest on the principal as well the other fees levied such as processing fees, administrative charges, loan insurance costs, etc. Using APR to make a comparison can give you a more accurate picture.

 

Not Checking Your Credit Score
A good score (700 or more) places you in a better position to negotiate the terms and interest rate. Check your credit score before applying for a loan to understand how much leverage you have.

 

Not comparing offers from different banks
Not comparing offers across multiple lenders is a common mistake that most of the applicants make. There are two ways to finance your car – through a financial institution or a dealer. Whatever financing option you are choosing, make sure you look at different deals before picking the best one. Doing so will help you in saving a considerable amount of money in total outgo of the loan.

 

Not Choosing the Right Tenure
The longer loan tenure may sound appealing as your monthly EMIs becomes smaller. But do not forget with a long tenure you also have to pay more than what you have initially borrowed along with the additional interest. So, opting for a longer loan tenure is not a smart move. Not only it increase your cost of borrowing but also the value of your car will depreciate to a great extent by the time you are done paying off the loan dues.

 

Wrapping It Up
Using the information provided here you can bypass the common mistakes that borrowers often make and get one step closer to the car of your dreams. Choosing the right lender is paramount. When evaluating options, do consider HDB Financial Services, one of the leading car loan providers in India.

 

Here, you can instantly calculate your car loan EMI and total interest payable. Furthermore, you can expect a smooth and paperless application journey, attractive interest rates, and flexible repayment terms. Conveniently apply for a car loan online today!