The interest rates applied on your car loan depends on the following factors:
a) Income: A higher wage indicates that the loan will be serviced on time. Those with higher salaries get better lending rates from banks. Banks continue to prefer salaried employees over self-employed individuals since wages ensure that the account receives daily cash flow. But, self-employed professionals have an advantage over salaried workers since they make more.
b) Tenure: Longer loan terms carry higher interest rates since they pose a greater risk to the lender. Hence, select a term that will provide you with the best interest rate.
c) Age: Throughout the car loan application procedure, the borrower's age is quite crucial. The younger the creditor, the more years he would have to return the loan. Automobile loans will be offered to those over the age of 21. Loan amounts and interest rates are much lower for younger applicants than for older ones.
d) Relationship with Bank: Favor is frequently offered to long-term bank clients based on the fact that their credit record is easy to view. If you are a current bank customer, the bank will be able to evaluate your account history, any recent credit or credit card charges, and your overall financial situation. As a result, the committed consumer receives preferred interest rates on deposits.
e) Vehicle: The vehicle will be used as collateral in the event of a car loan. If the EMIs are not paid, the bank or NBFC will confiscate the vehicle. While determining interest rates, the model and age of the car are considered. In comparison to previous models, new cars from respected manufacturers have cheaper interest rates. Used automobiles frequently have high-interest rates since their value depreciates with age.
f) Co-Application: If you have another earning member of the family, you can add them as a co-applicant to the loan so that their income is also considered when processing your application for vehicle loans. If you enter both of your incomes, you will have a larger payback potential and, consequently, a cheaper interest rate.
g) Employment Type: Working for a reputed company will almost surely earn you a good bargain on your car loan interest rates. Some banks maintain a list of approved employers and reputable entities to which they refer when granting the loan. Working in these firms ensures job security and a steady flow of money to bankers. You may also request a loan with a bigger loan amount and lower interest rate.
h) Downpayment: While banks will lend you up to 100% of the vehicle's ex-showroom price if you could make a larger down payment, you can negotiate lower interest rates. Lower debt amounts and improved payback potential result from higher down payments. Banks are actively seeking low-cost lending customers in order to lower their default credit risk. When you submit a larger down payment, you have a better chance of getting a lower interest rate.
i) Existing Liabilities and Investments: Last but not least, your present loans and responsibilities play an important role in deciding your loan eligibility and interest rates. If you have existing debts, your repayment options are limited. The lender perceives this to be a high-risk plan. That would also put further strain on the cash flow. As a result, a person with very little or no present liabilities is a favored candidate for any bank.
