Tuesday, August 14, 2012

Know Real interest rate on the loan before taking a car loan

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Buyers should negotiate for a better rate with banks as there might be discounts from a car dealer to push sales

ONE area that has become the centre of attention and the basis for intense competition among banks is car loan. Lenders have used lower interest rates as a tool to attract customers, making the offer more exciting for all those who are planning to use a loan for their vehicle purchases. Those looking for new purchases, should ensure that they make the most out of the available benefit.

Not all rates: Banks may not slash all the rates offered to their borrowers.

An overall change can be easily done by changing the base rate or the prime lending rate, but often this is not the route that is adopted. All that is done is that the interest rates for a specific category like car loans are changed to encourage more borrowers to take loans for a particular purpose.

There are two reasons behind making such a decision. First one is to ensure that the interest rates are lower than what they were some time ago. The other thing is that it is also a tool to ensure that the rates are competitive or lower than the other loan providers so that more people come towards them for the purpose of the loan.

Actual rate matters: Another thing that is equally important is the actual rate paid by the borrower.

If the overall rates are higher, then the burden will also be more on the borrowers.

The manner in which the interest rates are calculated is also important.

The lower the amount, the better is the chance that a borrower will come forward for taking a loan.

This is the reason why the actual rate has to be compared across the different loan providers, though on a common base. After gatting a fare idea of the actual rate, other conditions should be considered to enable the borrower to make a decision.

Negotiate: In the midst of this entire situation, there is one thing that needs to be done and that is the requirement for the individual to negotiate for a better rate. There are times, when the dealer has some tie up with a bank for the purpose of providing the loan. Here, the rate available under this agreement becomes important, as there might be a concession which can be used to push sales.

The other thing is that there are also special offers that are given by the banks and when there is a need to buy a vehicle then the specified bank can also be asked to ensure that there is a lower rate that is applicable. While all this is being done, it is important to consider that the conditions related to the loan are such that there should not be any hit to the borrower in terms of the manner in which the interest rate is calculated or the actual base upon which the interest is charged. These are things that can actually end up harming the position of the borrower which they actually need to avoid.

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