Are you planning to take a loan to buy your dream car? Here’s a checklist for you

To avail of favourable terms for a car loan, a good credit score is of prime importance. One should check the credit score through a credit report from a credit rating agency. A good credit record of paying EMIs and credit card outstanding bills on time typically helps improve the credit score.

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The higher the term of the loan, the more time one gets to repay. One should also consider the interest rates levied by different lenders. A small difference in rate can make a significant impact on the total borrowing cost. One should also check whether the monthly EMI in consideration is aligned with one’s budget and financial goals.

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It is very important to check the provisions applicable for prepayment and pre-closure of the loan. Lenders usually levy charges/penalties for pre-closure of the loan. A comparative study across various lenders helps to arrive at a suitable loan.

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Lenders may want the buyer to purchase a comprehensive car insurance policy to be able to avail of the car loan. This insurance cost should also be factored in while making the loan decision.

(Disclaimer: The opinions expressed in this column are those of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

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