How to Choose the Right Loan During Festive Season: Festive season is currently going on in the country and Pushya Nakshatra is on 4-5 November. In this, people consider it auspicious to buy a vehicle with gold, silver, property, electronic items. If you are thinking of taking any kind of loan for shopping in this festive season, then we are telling you how to choose the right loan?
1. Check interest rates of different banks
You can get information about interest rates through the official website of the bank or other sources. Banks also offer different interest rates depending on the customer’s profile and repayment capacity. Keep in mind that small differences in interest rates can cost you a lot more for your car in the long run. There can also be a big difference in your EMI.
2. Pay attention to pre-closure penalty
While taking a car loan, you should check whether the bank from which you are taking the loan charges pre-closure penalty. Pre closing means paying the loan amount before the tenure. Penalty rates are not the same for all banks. Therefore, choose your bank wisely. Consider banks that either don’t charge penalties or charge very small amounts.
3. Check processing fees
Almost every bank charges a certain amount to process the car loan application. Sometimes it is also seen that, where some banks and agencies give car loans at low interest rates, but they charge very high processing fees while giving the loan. Therefore, before taking a loan, one should find out from the bank how much processing fee it will charge for processing the loan.
4. Avoid taking loan for too long a period
Loan should be taken for as short a period as possible. Generally, a car loan can be taken for a maximum period of 8 years, but if you take the loan for a longer period, you are given the loan at higher interest. This interest rate can be up to 0.50% more than the interest rate of short term loan (3 to 4 years). A long term loan can increase the price of the vehicle by up to 25%.
5. Offers and Schemes
Most banks offer special offers on car loans during festive seasons or certain periods of the year. One should take advantage of such offers. These offers include waiver on processing fees and pre-closure penalties, 100% funding on the vehicle, low or 0% interest rates, special gift vouchers, etc. People who have a good credit profile can get the best deal.
Is it right to take loan at fixed interest rate or floating interest is better?
Banks or NBFCs offer loans with two types of interest rates. Fixed interest rate and floating interest rate.
Fixed interest rate
In fixed interest rate loan, the interest rate is fixed even before taking the loan. There may be any change in the market interest rate (repo rate), but banks will not change the interest.
Floating interest rate
The interest on floating interest rate loan is decided on the basis of repo rate. The biggest advantage of floating rate loans is that there is no prepayment penalty. Along with this, loan is available at lower interest rate in floating interest rate as compared to fixed interest rate. Whenever RBI reduces the interest rate, the rate decreases. The interest rate increases when the interest rate increases.
What is the criteria for taking loan?
There should be a regular source of income. Credit score should also be good. Having a low credit score reduces the chances of getting a loan approved. Along with this, banks give loans at higher interest rates in case of low credit score. The document should have identity proof like PAN card, Aadhar card, passport. Address proof should be a document like Aadhar card, passport, utility bill, or rental agreement. Employment proof and bank statement will also have to be provided.