Is Taking A Car Loan The Best Option To Buy A Car?
Well there is no doubt that in todays modern world cars have become an absolute must have
. Increased demand for cars has led to a booming growth in the car manufacturing and associated industries. With car loans becoming easily accessible the number of people opting to buy cars has gone up. All you need is a decent credit score and a bank account and your loan check is delivered. In the excitement to buy a car have you really checked the terms and conditions of your car loan?Most people dont read the terms and conditions of their loan agreement and repent for it at a later stage. Companies that offer you a car loan are not doing charity but are into a business that makes them a lot of money. Where does this money come from? Well the lions share of that money comes from the interest that you pay on the loan amount. With competition among lenders tightening there has been a little relaxation in the interest rate that they charge. Yet a sensible customer ought to check every single details of the loan offer before they sign on the dotted line.
Interest rates on a car loan are offered usually in two variants. The first option would be a flat rate of interest. This methodology keeps the interest rate fixed for the entire duration of the loan term. The next method is offering an interest rate on a diminishing balance. This means that the interest rates would come down as the loan amount comes down during the loan tenure. Customers can analyze both options and then decide which one is suitable for them. Usually customers opt for the diminishing balance option.
There are other factors that you need to be aware of when you decide to avail yourself of a car loan. You will need to have some money with you for making a down payment. Loan companies do not finance the vehicle in full. The balance amount after your loan amount has to borne by you. You might also have to fork in some amount on account of registration, insurance and other formalities. The loan is sanctioned for a fixed tenor usually ranging from 2 to 5 years. Your repayment will be scheduled in monthly installments of equal amounts. There will be charges if you need to close the loan before the end of the tenure.
There will be a loan agreement between you and the loan company that both parties will have to sign. It is a legally valid document and you can be charged for any violations of the contract terms on your part. There will be hefty fines charged in case you make a default in the payment and they can even seize your vehicle. However if you are confident of your finances and can honor the agreement, then there will be no issues and at the end of the loan period you will be the proud owner of your car.
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