A car loan is generally opted for when the requirement for a car purchase is huge. This is the case when the down payment of a car is too much and can only be afforded with a loan. However, a lower car loan installment does not always imply savings. This is how car loans work as showcased as under:
Buying a car necessarily means taking a loan, specifically when there’s a shortfall of ideal cash. People invest a lot of time exploring the market for car options but it’s equally important to find out information about the car loans available in the market.
When you opt to take loans from a financial institution, the money is received in lumpsum. However, the amount is repaid in installments with a top up of interest. The interest rate varies, depending on the institution you approach.
Here are the main factors that affect the monthly installments and the total principle as gets accrued. This also shows how the car loans typically work in India!
- The principle amount: It can be essentially lower than the value of the car, of course depending on the down payment and trade in again!
- The annual interest rate: The annual percentage rate also known as APR can be the effective rate of interest on the loan available.
- The loan tenure: Car finances in India have been repaid in nearly 36–72 months. Hats a long period, however can totally vary on the agreed terms and conditions. Now let’s have a look at how these factors determine the monthly payment as under: How do these 3 factors affect your monthly payment?
A small monthly payment can be good but looking the overall financial picture, it’s not an edge. That lower payment could mean that payment is more over the tenure of the loan. A lower monthly installment can also hugely cost you. Car loans completely work on the relationship between loan term and interest amount.
There never will be any one car loan that will be suitable to all. That’s why it’s important to take a right decision before a car loan financial tick!
