Buying a car involves a lot of excitement, regardless of the fact whether it is the first car or the second or third! There are so many things to choose, which brand, what color, size, segment and so on. However (despite being interesting) we are not going to focus on these aspects here, we will talk about the slightly boring yet equally important aspects of buying a new car: the financial and the credit aspect. So what are the things that one should focus on when planning to buy a care; here is a list of few things to ponder about.
Fix a Budget:
When buying a car one can be spoilt for choice. While all of us may want to buy the latest and fanciest model but we need to keep our finances in mind. The choice of the car should be kept in mind keeping how much one has saved for the down payment and also how much EMI one can afford to pay a month. Some room for flexibility is there if one were to borrow from a lender who offers a higher LTV ratio or if one extends the loan tenure then the EMI burden could come done but it is best not to stretch yourself thin and stick to a budget. Being overleveraged or totally exhausting your savings is not a good idea.
From Where to Borrow:
In most cases individuals do take the help of auto loans when buying their cars. Choosing the right lender is important. While car loan interest rate is a crucial factor in this decision it is not the only factor that one needs to consider. Other factors that must be considered are; the loan tenure, what is the processing fees, the LTV ratio, turnaround time taken by the lender to process the loan and so on. Though interest rates are the most important factor but the above factors could also have an important bearing on the overall finances and choice of car. Compare interest rates offered by various lenders in light of the above factors before reaching a decision.
How Much to Borrow:
The amount you will need to borrow will depend on various aspects; these being the cost of the card that you plan to buy, what is the loan to value ratio, how much you have saved for the down payment and of course what is you EMI bearing capacity. All these factors are inter-related and do not operate in isolation. Depending on the how much you have saved for the down payment you will have to figure out your loan amount. Having said that you should check whether you can service the loan by using an auto loan EMI calculator to calculate your monthly outflow and also check with the lender the percentage of car value that they agree to offer as a loan. Depending on these factors you may have to change your car choice also in some conditions. If the LTV is low or you realize that the EMI might be a burden that you may find difficult to bear each month then you may be forced to buy a less expensive model.
Build Your Credit Score:
Though this appears at the end of the discussion it is not the least bit something that can be ignored. Being credit healthy should be a practice and not a onetime exercise but when one is looking to borrow in the recent future then building the credit score is of paramount importance. A good CIBIL rating can help one in getting the loan application approved, get good deals and help in faster loan processing. If you are wondering on how to boost your credit score then remember it is not too difficult; paying on time, keeping a low credit utilization ratio, not making too many credit enquiries and keeping a healthy credit mix go a long way getting a good CIBIL Score.
So if you are planning to buy a new car the above aspects could come in handy and can help you in keeping your finances healthy while allowing you to fulfill your dreams.