4 key factors that affect car loan interest rates

Here are some reasons why you should choose the Bajaj Finserv New Car Loan.

4 key factors that affect car loan interest rates

Car Loan

Credit score, loan tenure, and downpayment are some of the factors that influence the interest rate of your car loan.

A new car brings joy, comfort, and convenience. But it also comes with a price tag that not everyone can pay upfront. That is where car loans can help. They allow you to spread the cost over time with easy monthly instalments. However, every car loan includes an interest rate, and that rate decides how much extra you would be paying beyond the loan amount you borrow.

Even a small difference in your interest rate can make a big impact on the life of your loan. For example, a slightly higher rate may only add a few hundred rupees to your monthly EMI, but when you multiply that over several years, it could mean paying thousands more in total. That’s why it’s important to not just focus on the car’s price or features, but also pay close attention to the interest rate you're offered. Choosing a better rate can help you save a lot of money in the long run and make your ownership more affordable.

Read on to explore factors that affect your car loan interest rates.

1. Credit score

Your credit score is one of the first things lenders check before offering you a loan. It tells them how well you manage borrowed money. A high credit score, usually 700 or above, shows that you are reliable and pay your dues on time. Lenders are more comfortable giving low-interest loans to such borrowers. On the other hand, a low score can make the lender cautious. So, before applying, it is a good idea to check your score and improve it if you think it's not up to the mark.

2. Loan tenure

The loan tenure might influence your car loan interest rate, but more importantly, it affects how much interest you pay overall. A shorter tenure might come with a slightly lower rate and higher EMIs, but you’ll pay less interest amount in total. On the other hand, a longer tenure may reduce your monthly EMI, but you could end up paying more in interest over time, even if the rate stays the same.

3. Down payment

How much you pay upfront can significantly impact your car loan terms. A higher down payment reduces the amount you need to borrow, lowering the lender’s risk. In many cases, lenders respond to this reduced risk by offering more competitive interest rates. By saving more and opting for a larger down payment, you not only reduce your monthly EMI but also enhance your chances of securing a better rate. It's a smart financial move that can lead to substantial savings over the loan tenure.

4. Employment and income stability

Lenders evaluate your repayment capacity by looking at your income and employment history. Your job and income history help lenders decide whether you are a low-risk borrower. If you have a stable job and regular income, lenders are more likely to offer you a lower interest rate. Showing that you're financially reliable often leads to better loan terms.

Lenders like Bajaj Finance offer high-value new car loans that come with competitive interest rates and flexible repayment tenure options. Here are some reasons why you should choose the Bajaj Finserv New Car Loan.

Up to 100% financing: Get funding of up to 100% of the car’s on-road price, reducing the need for upfront payment.
Quick approval: Enjoy a fast and hassle-free loan approval process to drive home your car sooner.
Simple eligibility criteria and minimal paperwork: Apply with ease through a straightforward process that requires only basic documents.
Flexible repayment tenures: Choose a repayment plan that fits your budget, with tenures ranging from 12 to 96 months.

A new car adds comfort and convenience but choosing the right car loan is just as important. Interest rates, loan tenure, down payment, and income stability all impact how much you pay over time. Even a slight difference in rates can lead to big savings. With the Bajaj Finserv New Car Loan, enjoy high-value loans, quick approvals, and flexible tenures, making your car purchase easier and more affordable. Visit the Bajaj Finserv website or download the app and learn more about new car loans.

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