While a car loan is an efficient way to get the car of your dreams, minor mistakes in the process can cause long-term stress in your financial life. Avoiding common mistakes is important so that the loan you take out fits your financial situation and remains manageable, while also ensuring you’re paying as little as possible overall. Here are the five most common mistakes people make when applying for a car loan, and how you can avoid them.

Not checking loan eligibility

Loads of people apply for a car loan without verifying whether they meet the basic eligibility criteria set by the lender. This ends up leading to rejected applications or even higher interest rates on the loan. It is important that you verify the basic requirements, such as age, income, and documentation, ahead of time. For example, Mahindra Finance has a targeted car loan for individuals who are salaried or self-employed, and even for those who don’t have a robust credit report.

Paying Attention to EMI, neglecting the total Cost

While lower EMIs may look like an easier choice, the loan tenure is extended and ultimately leads to a higher rate of interest. It’s always important to calculate the total cost of the loan before signing. You should take into account the interest rates, the tenure of the loan, the processing fee, and any other undisclosed conditions.

Ignoring Down Payment

Many people opt for the zero down payment option without considering that it results in a higher EMI. By paying a higher down payment, you decrease the loan amount, the EMI, and the interest overall. If possible, you should consider paying 10–20% as a down payment.

Skipping the fine print

Never sign a loan application without reading the details clearly. You should be looking for:

1. Prepayment penalties
2. Processing fees
3. Late Payments Penalty Fee
4. Insurance and registration clause

Understanding this will help you avoid spending truckloads of money on unexpected expenses after getting the loan.

Not Comparing Lenders

Accepting the first loan offer you receive can sometimes turn out to be a big mistake. Be sure to evaluate different options from reputable lenders. Mahindra Finance (for example) offers fairly competitive interest rates, clarity in the processing of loans, as well as easy EMI options, especially in semi-urban and rural markets.

Conclusion

A car loan can be a great financial choice, but only if you’re responsible with the loan. If you can avoid making these five mistakes, you will have a much better time with your new loan and will avoid worrying that you made a poor decision. At the end of the day, always do your research, compare, and read the terms and conditions. Once you’re confident, you’ll be able to enjoy your new car without any issues.