Before opting for a loan for the dream luxury car, you must consider the following aspects.
Interest rate: This is the main factor that borrowers should find out initially. A small increase in the interest rate can result in a significant increase in the EMIs and interest payment.
Do Research to find out lenders giving the best deal. Several lenders offer lower interest rates for luxury car loans compared to the rates levied for compact cars. The financing division of luxury car organizations gives better rates compared to other lenders.
It is advisable to choose a floating interest rest for short tenure loans such as 3 to 5 years. Go for a fixed interest rate in case of loans having longer tenures.
Processing fee: The method of computing processing fee changes as per the lender. Some lenders charge a fixed processing fee while some calculate it as a fixed percentage of the loan sum.
Prepayment charges: These are applied when you prepay the loan sum or a part of it before the loan tenure. So check for this before availing of the loan.
Loan tenure: The loan tenure ranges from 1 to 7 years. Its advisable to not opt for longer tenure loan. Ideally the loan tenure should be between three and five years. A lower ten year translates to high EMIs but results in lower interest repayment.
Down payments: The general practice is for Lenders demanding down payment which makes up 15%-20% of the total loan amount. Certain banks such as HDFC and ICICI offer up to 100% finance. However, note that lower down payments result in higher EMIs and amount of interest to be paid. Finance experts opine that the luxury car loan EMI should not go beyond 25% of your monthly income.