You’ve made the right choice if you’re planning to finance the purchase of a vehicle. As you may already be aware, there are numerous advantages to vehicle loans. But the biggest one may be that you won’t have to pay a sizable number all at once. You can instead pay back the loan in equivalent monthly installments (EMIs) and set aside the money for a crisis. As long as you make timely EMI repayments, getting a car loan might also help you improve your credit score. A high credit score can help you qualify for loans with lower interest rates and other attractive offers. Before making a vehicle loan application, we do so much research. But While performing these researches, we could come across a lot of false information about vehicle loans that can make us feel anxious.
Therefore, we will address five of the most widespread myths concerning car loans in the sections below:
Lenders offer 100% financing for your car
Numerous dealers promote 100% financing, which essentially means that the loan will pay the entire cost of your car. Typically, this is not the case, and if it were, the interest rate on such a loan would be far higher. Most vehicle loans allow you to borrow up to 90% of the vehicle’s invoice value. Depending on your history with the lender and other variables like your personal credit score, certain financial institutions might also offer 80 or 85 percent financing.
You should choose 0 interest loan
Many dealers try to entice buyers with interest-free financing, but this is not necessarily the hassle-free, cost-effective option that it advertises. The maximum duration for interest-free loans is frequently less than three years, which is too little time to give the borrower adequate financial flexibility. Increasing the down payment is another option for lowering the loan balance. Make sure the dealer does not raise other fees to make up for offering auto loans with 0% interest.
Car loans can only be availed for buying a new car
You must have heard from many people that getting a vehicle loan for a used vehicle is impossible. This is inaccurate because numerous reputable financial institutions in the nation do provide used car loans. Up to 90% of the value of the vehicle may be funded, and vehicle loan interest rates on a used car may range from 9.5 percent to 17 percent. Due to the fact that used cars are generally less expensive than new ones, used car loans might help you afford to acquire a luxury vehicle.
If you apply for a car loan through a dealer, you can get better interest rates
Your auto dealer has no power over how your credit score is affected. It is generally true that higher interest rates result from having a low credit score. But applications for auto-finance loans are rarely turned down because they are secured loans that use the vehicle as collateral. Before deciding on the terms and conditions of your car loan the creditor will also consider other aspects. This includes employment history and income level.
Refinancing your car is not a good idea
Refinancing a car is taking out a new loan with better terms, including a lower interest rate, to pay off your current car loan. This is typically done when you want to increase the repayment period on an existing loan or decrease the burden of high EMIs. Even though many people would advise you against it, refinancing your car can help you reduce the high-interest rate you are currently paying.
