Interest Rates and Car Loans
Interest rates vary from loan lending company to company and there is a standard availability of loan for every buyer. It is often advertised that car loans at 11% interest and low interest car loans but when one actually goes for purchase there is a different picture.
What is the interest for? Well actually like any loan, the lending institution charges the borrower for the use of this money for the purchase for that time and they charge interest over it. When you enquire about car loans you are made to understand that it is at very low interest rate but sometimes in the end when calculated it comes to be much more than other loans and in fact home loans are the cheapest. But surely you won’t get a home loan to buy a car and you have to commit for this type of loan. The dealer offers a range of interest rate for the loan. This varies from institution to institution. They have option regarding loan lenders and they may be banks or private loan lenders. Here again all the rules depends solely on the loan lending institution. Usually advertisements flash as 0% car loans or 8% or 11% but when you go for a deal the actual interest rate comes up to 18 to 19% much, much more than for home loans.
First survey the market for the actual price of the car of that particular year. Now consider at what interest rate the loan is available. You can negotiate with the dealer for the total price of the car and come up with an understandable amount. Though the interest rate may be fixed one can opt for flexible interest or fixed interest for the loan amount. There maybe a lot of variations but it is usually observed that the companies offering loans on low interest rate often some how charge the buyers in some other way and recover their dues. Whereas the loan lending institutions who offer car loans at a higher rate of interest in the long run turn out to be cheaper. One can also negotiate on the interest rate offered for the loan amount. Loan will be available for maximum 80% of the total price and it is better for the buyer to arrange the down payment in cash to hasten the procedure of completing the deal.
The best way would be to minimise the car loan and give maximum amount at the beginning. A smaller loan means smaller EMIs and less burden of repayment. Calculate the interest rate before finalizing any company and which car loan works out best for you.