The Indian automobile sector is always buzzing with new car variants and exciting launches. For an audience that is always on the lookout to upgrade, a car loan is always on demand. If you go online to search for a car loan online, you will find plenty of lenders offering top features for your convenience. However, when it comes to financial matters, it is better to be safe than sorry and plan your expenses efficiently.
Factors to Calculate how much car loan you can take?
The car loan principal will be different from one person to another as the affordability factor will vary. There are two steps to decide the right amount of car loan for you:
- Is your income enough to pay EMI?
First, you should calculate your EMI as per your affordability. Financial experts advise that your EMI should be 20% of your monthly salary. So, if you happen to be earning Rs. 40,000 per month, the right amount of EMI will be Rs. 8,000. Memorize it as a 20% rule for the next time you go out to apply for car loan. Also, you can first calculate your loan EMI easily with online EMI calculator.
- Decide the car loan principal amount
Second, you should calculate loan principal as per EMI. The calculation of car loan principal amount should be based on your income. You should not decide the loan principal first and consider the affordability of EMI in the later stage. It should the reverse. First, consider your monthly income, then calculate your EMI affordability and then decide on the car loan principal.
For example, if your monthly income is Rs. 40,000 and as per the 20% affordability factor, your affordability will be Rs. 8,000, then this Rs. 8,000 can be your EMI, that is part of principal plus interest. Supposedly, the interest rate is 10.5% and the loan tenure is 7 years, then with respect to Rs. 8,00 EMI, you can afford to get a loan of Rs. 5 lakhs.
So, you should choose a car with the budget of Rs. 5 lakhs only. That is the maximum car loan principal you can afford.
Once you are done with the exact loan principal, you should know the eligibility factors.
What is car loan eligibility?
First, ask yourself, am I eligible for a car loan?
You do not have to travel to your nearest bank to see if you can apply for a car loan. All you have to do is check the eligibility factors online.
Here are the car loan eligibilities that you need to fulfil to get the loan application approved:
- Age: Minimum age 21 years for salaried & 18 years for self-employed and maximum age 60 years for salaried employee & 65 years for self-employed professional
- Type of employment: Salaried or self employed
- Tenure of employment: 1 year with current employer for salaried and 3 years on business in same lines for self-employed
- Residence: 1 year stability at the current location
- Credit Score: Applicants having a credit score between 750-900Incase you have a low credit score you can also work on it to improve your credit score over time by not defaulting on your bill payments, Paying off for credit card debt on time, keeping your credit balance low, not opting for simultaneous loans.
In the end, it is all about efficient planning and making sure that you are aware of your expenses.
Now, Let’s Move to The Process of How to Pick the Best Car Loan
Do your research and gather at least a basic understanding of what it involves. Once you are aware of the banking terminologies and the car loan process, you can understand the loan features with better clarity. So, when you go out to apply for car loan, you are not making rash decisions unaware of what all it means.
Here are some of the important loan features that you should know about:
- Interest rate – Car loan interest rate is the amount of interest a lender levies upon the total amount of sum credit to you through a loan. A lender looks into your bank statement, previous spending, employment, and bank statements to offer you appropriate interest rates.
- Repayment plans – A repayment plan along with a grace period is something you should look for while opting for any loan. Banks offer you a grace period in cases wherein you are unable to pay the monthly EMI’s on time. This helps you to keep your credit score intact.
You can calculate your EMI affordability, check your credit score & all other factors of a loan and apply for a loan under the same roof with Droom Credit. Droom makes it easy for the applicants to find the leading banks and NBFC’s to avail best car loans within their requirements. So, go ahead and drive home your favorite car with Droom Credit.