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5 Smart Tips to Get the Lowest EMI Car Loans
Posted on Friday, May 24th, 2024 | By IndusInd Bank
A new car loan is arguably a convenient way of financing the purchase of your dream car. Repayable in Equated Monthly Instalments (EMIs), a bank loan enables you to bring your dream car home without depleting your savings or making any major changes to your lifestyle. Of course, your overall cost of borrowing affects the EMI you ultimately pay. As a borrower, you desire the most favourable EMIs to keep your finances intact.
To that end, you can take some smart steps and reduce your EMIs, thereby making your car purchase a financially sound decision. Here are five actionable tips that can help you lower your new car loan’s EMI.
1. Compare and Negotiate Interest Rates Offered by Lenders
The interest rate charged on your new car loan directly affects your EMIs. The higher the interest rate, the higher the EMIs you eventually pay. Since new car loan interest rates vary across banks, it’s best to compare lenders to find one offering attractive interest rates along with flexible repayment options.
A good credit score, spotless credit history, and good standing with your existing bank are sure to help you negotiate a favourable interest rate.
2. Choose a Car Loan with a Comfortable Repayment Tenure
When applying for a new car loan, it’s a good idea to select an offer with a comfortably long repayment tenure. When you choose a lengthy tenure, your loan amount is equally spread out over a longer period which ultimately brings down your EMIs.
For instance, a loan amount of INR 10 Lakh will require an EMI payment of INR 83,333.3 for a tenure of 1 year. On the other hand, it will reduce to INR 41,666.6 if the tenure is 2 years. If you are planning to apply for a new car loan, consider opting for a longer repayment tenure to lower the EMI.
3. Make a Bigger Down Payment on Your Car
A down payment is the percentage of the vehicle’s price you are required to pay upfront at the time of the purchase. As the principal amount borrowed rises, so does your overall interest payout. Making a big down payment reduces the loan amount you need, thus reducing your interest obligation.
However, exercise caution when deciding the amount of your down payment as it can deplete your savings.
4. Prepay Your Car Loan
If you earn a bonus, receive a salary hike, year-end incentives or any such windfall, prepaying your loan partially or completely can help you reduce your EMIs.
Pre-paying your loan partly will help you reduce your principal amount, thereby lowering your EMIs. Alternatively, if you can prepay your loan in its entirety, you can eliminate the need to pay EMIs altogether. However, this might attract prepayment or foreclosure charges. To make an informed decision, make sure to examine your bank’s policy in this regard.
5. Opt for a Loan Balance Transfer
You can reduce your new car loan’s EMI even after taking a loan from a certain bank. If you find another bank offering lower interest rates and higher flexibility on car loan repayment, you can make use of the loan balance transfer facility. This facility allows you to transfer the remainder of your loan amount from one bank to another to benefit from better loan terms. Since balance transfer charges and procedures vary across banks, read the fine print and discuss the process with both banks for a smooth transfer.
6. Reduce Your New Car Loan EMI
Buying a new car is a significant investment that benefits you for many years to come. With the above-mentioned tips, you can considerably economise the purchase of this investment.
Comparing interest rates offered by lenders, choosing a car loan with a comfortable repayment tenure, making a bigger down payment on your car, prepaying your car loan, and opting for a loan balance transfer can help you lower your new car loan’s EMI substantially.
Are you ready to make your next car purchase friendlier for your bank account? Contact a trusted lender and apply for a new car loan online today!
