Availing easy car loans is just a few clicks away these days. It is good to know that there are flexible financing options to go ahead with purchasing our dream car. You must be aware of the fact that not all banks provide 100% of the money required to buy your car. There is a certain percentage of the total value of the car that needs to be contributed by the buyer. At least 25% of the value needs to be given by the buyer- this money is also called as down payment.
Cars or any other automotive always depreciate in terms of their value. So, banks will not be able to gain much even if there is a chance of defaulting in the loan by the applicant. This is why the interest rate for a car loan is high. So, it is entirely logical to pay as much as down payment as possible so that you can save up on the interest rate and ultimately save up on your monthly installments as well.
Let us take an instance where you want to buy a car worth 10 lakhs, and if your car finance is 75% of the value, at an interest rate of 13.75% for five year tenure. Your monthly emi will be 8600. Similarly, if you were taking a loan of only 500,000 instead of 750,000, your monthly emi will be 5800. Your overall savings would be 350,850. Just imagine, you are saving 3.5 lakhs. Now you can see the difference for yourself, right?
Make sure you don’t affect your everyday expenditures too much when you decide on the down-payment amount. And remember, while applying for a car loan also banks are sure to consider your previous loan and credit records meaning your CIBIL score as well as your credit information report. So make sure you have an account with sufficient savings and supporting income proof.
There is no set limit for the percentage that can be paid as down payment; in fact it would be best if you could put forth the maximum possible amount that is affordable by you. The more you pay as down payment, the less you will need to pay in terms of interest rate and naturally the tenure of your car loan will also be reduced.