Is it on your wish list to buy a new car? If your credit score and income match the eligibility criteria, financing a new car is easy. You should choose your car loan carefully since it can make a big difference to your borrowing experience. Would you like to know what you should keep in mind before taking out a car loan?
Here are the top tips you need to follow when taking out a bad credit car loan.
bad credit car loan Interest Rates
A car loan can have an interest rate of 6.75% to 9% per year. The interest rate on a car loan depends on factors such as credit score, income, loan tenure, car category/model, down payment, and others. If you want the best distribution, you should compare all the available car loan offers online and contact the lenders offering the lowest interest rates. There are both floating and fixed-rate car loans available from lenders. Interest rates are likely to rise if market trends indicate that fixed-rate loans are a good option.
Before applying for a bad credit loan, check your credit score
You can get a car loan with an attractive interest rate if you have a higher credit score. Before applying for a credit car loan, you should check it independently. Your credit score can be raised by taking corrective action if it is not up to par.
Choosing the Right Loan Tenure
Longer loan terms may result in lower EMIs, but you will pay more interest overall. Shorter tenures are best if you are comfortable paying higher EMIs. Most lenders allow borrowers to repay a car loan within 7 years.
Charges Applicable To The Loan
Lenders may charge lower interest rates on car loans, but they may also charge higher processing fees. So, you may finish up paying more than you save by choosing a car loan for its reduced rate of interest. Choose lenders with minimum charges and a lower interest rate.
Flexibility in repayment
Looking to repay a car finance loan earlier than the term of the loan? If you repay or pre-close your car loan, your lender may charge you prepayment charges! You should check in advance if your car loan lender imposes prepayment or preclosure penalties. Choose a lender who charges the lowest prepayment penalty.
Processing time and services
It should be easier to apply for a car loan with minimal documentation. Online access to your loan details and banking services should be available for your loan account. All of these factors are crucial when you plan to apply for a loan.
Carefully Read The Fine Print Of The Loan Agreement
A car loan may seem very attractive when you apply, but later on, you could find yourself stuck with the wrong loan product. If you want to avoid such a bad situation, carefully read the best print of the loan agreement. How often will the moneylender revise the interest rate? What are the charges applicable to your bad credit loan? Read all the important details carefully so that you won’t be astonished and amazed later.
Alternative To Car Loan
Sometimes people fail to meet the bad car loan eligibility requirements of the banks. They don’t need to be sad because they may still have some alternative options in hand. When buying a car, they may look into secured loan options like loans against securities, FDs, and gold loans.
Check The Tie-up Of The Car Company With The Lender
Before you finalize the car loan, inquire from the car company if they have an exclusive tie-up with any lending institutions. It is common for car companies and banks to partner, where they offer payday loans for specific car models at attractive good interest rates and easy terms.