Planning a Car Loan This Diwali? Key Tips to Avoid Financial Stress

Owning a car is a dream for many, and for most middle-class families, it represents one of the biggest financial decisions after buying a home. Since the cost of cars often runs into lakhs of rupees, many people turn to banks and financial institutions for a car loan to fulfill this dream. With Diwali around the corner, several buyers are considering purchasing their car during the festive season when attractive discounts and loan offers are widely available. However, before you finalize your car loan, there are some essential points you must keep in mind to avoid future financial strain.

Make a Higher Down Payment

When taking a car loan, the size of your down payment plays a crucial role. The larger the down payment, the smaller your loan amount will be, which directly reduces your monthly EMI and overall interest outgo. Experts suggest paying at least 20% of the car’s value upfront. For instance, if you are purchasing a car worth ₹10 lakh, aim to pay at least ₹2 lakh as the down payment. This approach not only eases your repayment burden but also ensures that you pay less interest over the loan tenure.

Choose a Shorter Loan Tenure

While banks may offer loan tenures of up to 7 years, stretching your repayment period is not always the best decision. Ideally, you should aim for a loan duration of no more than 4 years. A shorter tenure ensures you pay lower interest in the long run. Additionally, your EMI should not exceed 10% of your monthly income to keep repayments manageable. If you find the EMI too high for a shorter term, only then consider extending the tenure slightly—but keep the balance between affordability and interest costs in mind.

Compare Loan Offers Across Banks and NBFCs

Do not settle for the first loan offer you receive. Car loans differ from one lender to another, and interest rates may vary significantly. Before finalizing, compare offers from multiple banks as well as non-banking financial companies (NBFCs). Factors to check include:

• Interest rates

• Processing fees

• Prepayment charges

• Other hidden costs

By carefully evaluating all options, you can choose the most cost-effective car loan that suits your needs.

Set a Realistic Car Budget

Taking a loan doesn’t mean you should stretch your budget for a luxury or high-maintenance car. Always choose a vehicle that fits comfortably within your financial capacity. Remember, the initial purchase cost is just one part of car ownership. Maintenance, fuel, servicing, and insurance also add to your monthly expenses. Opting for a car beyond your budget can disrupt your financial stability, even if you manage to arrange the EMI.

Festive season offers and discounts can be tempting, but it’s essential to stay within your planned budget. Buying an expensive car just because a bigger loan is available may lead to unnecessary long-term financial stress.

Key Takeaway

A car loan can help you turn your dream of owning a car into reality, but only if you approach it wisely. By making a higher down payment, opting for a shorter tenure, comparing multiple offers, and keeping your car budget realistic, you can ensure a smooth and stress-free borrowing experience.

This Diwali, as you prepare to bring home your new car, make sure your loan decision is as bright as the festival itself. Smart financial planning today will ensure that your dream purchase does not become a burden tomorrow.