Tips to repay Car Loans efficiently
Today, having a car is not a luxury, but a necessity. Imagine the independence it provides to move around anywhere as per your convenience, going on family trips or avoiding the crowded public transports on your way to work. The benefits are many.
Almost everyone wants to own a car and doing so is affordable now, thanks to Car Loans offered by several banks and financial institutions.
However, there are certain responsibilities attached when you take a loan. Besides stretching your monthly budget, you also need to ensure that the EMIs are paid on time. Let’s look at effective ways to handle your Car Loan, so that there are no bumps ahead.
Here are some simple tips to get you started:
- Determine your loan details like - balance and payoff penalties: Step one of paying your Car Loan faster is to dissect the details of your loan. Using a Car Loan Calculator, you can determine whether your loan amount was calculated using simple interest where your monthly payment is based on the outstanding balance of your loan; in lay man’s terms, paying off early amounts to lesser interest payments. Sometimes, paying off a loan early results in lenders getting less interest and hence, they a prepayment penalty is imposed. At times, paying a loan off early and bearing the costs of prepayment penalty is a gain as you save a little interest. Lastly, ensure that additional payments that you make reduce your principal amount. Financial institutions can direct additional payments toward other fees like interest rather than decreasing the principal amount.
- Pay extra principal– Just sold some old furniture that was collecting dust at home? Or got a bonus at work? Use the windfall to pay off the principal amount. Reducing the principal will bring your interest component down, which in turn reduces what you owe on a whole.
- Reduce extra expenses– Everyone likes going out and living it up once in a while – or maybe more often. However, reducing your unnecessary monthly expenses temporarily will add to your loan corpus. This saved up money will have a direct impact on your loan account if you directly use the money towards the loan. You don’t need to live the life of a saint. It’s about cutting down on one or two things such as eating out, impulse shopping, etc. You may be surprised to see how these little steps add up.
- Snowball your payments– This method works if you have multiple loans. You begin by paying off the smallest debt or one with the highest interest component. Once it’s completely paid, the money saved can be directed towards settling the next larger debt. Continue the pattern till all debt is paid. The key is to stay disciplined and resist incurring fresh debt. For example, say you have two loans, if you settle the latter, you would have freed up some money every month, which can go towards your Car Loan.
A Car Loan should offer competitive rates and flexible payment options. HDFC Bank not only helps you raise fund, but also assist you in researching and finding your dream car. It’s instant New Car Loan—ZipDrive – exclusively for HDFC Bank customers, provides instant disbursal 24X7, up to 100% finance, flexible tenures and negligible paperwork.
In case, you are buying your first car and are worried about chances of Car Loan approval, click here for some tips to improve your chances.
So what are you waiting for! Apply for your Car Loan at HDFC Bank today and make your dream car a reality.
* Terms & conditions apply. Car Loan disbursal at sole discretion of HDFC Bank Ltd. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.