Cars Finance - Interest Rate Comparison

The current pandemic demands a personal vehicle for the safety of yourself and your family. Owning a car has come a long way and now has many options like buying, leasing, subscription etc. but even now, buying a car is the most preferred way to go about it. Since a car is the 2nd largest investment of a person’s life, setting up a budget and properly financing a car is the most important step towards car ownership.

What is a Credit Score/CIBIL score?

The first thing a bank or financing firm will enquire about is your credit score. A credit score is Credit Information Bureau India Limited is also called the CIBIL score. A credit score is determined based on an individual's credit utilization, payment history, type of credit and the repayment capability. Ideally, a score of 700 and above is considered a good credit score for availing the car loan. But a credit score above 600 can also be sufficient for car loans if you are ready to pay higher interest rates. In short, the lower the credit score, the more you will be charged.
 

Car loan interest rates:

Most of the interest rates can be pretty fluctuating based on the current situation, our credit score, credit history, income and the amount of loan. Car loan interest rates in India are ‘complex rates’ and has a compounding effect.
 

MCLR:

Marginal Cost Of Fund Base Lending Rate (MCLR) is the minimum permissible interest rate allotted by the bank. The MCLR is decided by a bank’s repo and reverse repo rate.
 

Fixed and floating interest rates:

A customer is always given a choice of either fixed or floating interest rates. A fixed interest rate is where the amount of instalments remains constant over the tenure of the loan while for floating interest rates; EMI would change as per the market dynamics. For a floating interest rate, change in bank policies, MCLR etc. can result in a higher or lower instalment. The rate of interest for a car loan has decreased for the last few years hence; the floating interest rate is most preferred. A fixed interest rate can be changed to floating and vice versa for a penalty.
 

Let’s compare some of the interest rates offered by the banks in India:

Factors affecting the rate of interest:

• CIBIL score: the lower the CIBIL score, the higher will be the rate of interest.

• Steady income: your rate of interest also depends upon your income and occupation. Banks may offer a lower interest rate if you have a steady income flow.

• Tenure: the longer the loan tenure, the lower is the interest rate. But with the longer tenure, you will end up paying more in interest over the years.

• Age and model of the car: for a car loan, your car acts as a security and should act as collateral in case you default on the loan. Hence your interest rate depends on the model and age of the car. Therefore a car with the higher resale value may help you score a lower interest rate.

To avail any type of loan, there are certain eligibility criteria by meeting all the conditions. In the end, financial security is what affects the interest rate. You can now apply for a car loan from the website of the bank and even opt for financial solutions from the online car selling sites. You can also calculate your credit score online as well as determine your car loan EMIs based on the current interest rate.

Explore MYNEWCAR.in. We are an online marketplace which simplifies the car buying process by providing a transparent, convenient & safe purchasing experience. You can get Brand neutral expert advice, Search Cars, Compare Cars Online, Book a Door-step Test Drive with a click, Get On-Road Price, Offers & Discounts and Book your new Car Online. 

We provide Finance, Car Leasing assistance along with an option to Exchange your car and renew your Car Insurance  with discounts upto 40%, all under one-roof. 

We also bring Latest Automobile News for our readers including Buying Advice, New Car Launch Updates, Car Offers, Reviews and much more. Not just that, MYNEWCAR.in  also provides you with car maintenance tips and car driving tips for your car.

Now you can also sign up for new offer notifications and daily car related updates. For more updates and Latest News Follow Us: Facebook, Twitter, Instagram, Youtube, Pinterest