Availing a car loan or choosing to self-finance the entire expense a car have their own advantages and disadvantages. One can choose based on their personal financial needs and requirements as to what is better suited.
If you do not have any other financial commitments for a few months, it is better to self-finance the entire expense as you will not have to pay any interest for the same to a bank or a Non-Banking Financial Company (NBFC). So, you will not be spending anything more than the cost of the car. If you take a car loan, you will be paying interest for the loan amount and it can work out to be more expensive in the long run.
If you have financial commitments and other expenses to meet, it is better to avail a car loan as it will not take a toll on your pocket. You can get the entire amount for the car funded by the bank and you can repay the same over a tenure that you choose. You will only need to pay small EMI amounts every month and can close the loan in time. This is beneficial as all your savings do not get depleted in one go and you will have money saved for other emergencies.
If you do not have a good credit score, it is better to self-finance the car as a low credit score can lead to a car loan rejection and this can further impact your credit score negatively.
If you have a good credit score, applying for a car loan is a good idea as it will be easily approved, and you can further build your credit score by making all your payments on time. It can act as a score builder when you repay all your EMIs and time. An improved credit score can get you better credit deals in the future.
Also, if you have a good relationship with your existing bank, you can get great deals for a car loan. Interest rates for a car loan begin at just 8.60% and can go upwards based on your credit profile.
So, choosing to apply for a car loan or self-financing the entire budget is solely dependent on the customer’s financial needs.
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