Planning for a car loan? Here're handy tips to get best deal from banks

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The Supreme Court recently prohibited the plying of 15-year-old petrol and 10-year-old diesel vehicles in the National Capital Region. Many would be wondering if it is a good time to replace their old car. If you plan to take a loan to do so, consider these points

  • First, check the rate your existing bank is willing to offer, then visit online loan providers to compare the rates offered by others. Banks offer preferential rates to existing customers.  
  • Check your EMI affordability by deducting your expenses from net monthly income.  
  • Total EMI on all loans should not exceed 40 per cent of your net income. 
  • Loans are available for up to seven-year tenure. Select the shortest tenure you can afford as a longer tenure increases interest cost. 
  • Many lenders offer to finance up to 100 per cent of the vehicle's cost. 
  • Enquire about processing fee. Many lenders reduce or waive it during festive season. 
  • Prepaying the loan is a good idea. But consider the charges, limits, etc, on prepayment of car loans. Usually, fixed-rate car loans come with prepayment charges, sometimes as high as 5-6 per cent of outstanding amount.

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