Car Loan Tips: Most of the people take loan to buy a car and when it comes to taking a loan, many people buy a car more than their budget by coming to the words of others.
Car Loan: Most people take a loan to buy a car and when it comes to taking a loan, many people buy a car more than their budget by coming to the words of others. For this, they have to take loans more than their capacity, which they find it difficult to repay later. But, in the beginning, such people feel that the loan can be repaid slowly, whereas in reality it does not happen.
Taking a loan beyond your capacity is a big mistake. Due to this, you get buried under the burden of loan, which troubles you in the long term. This spoils your finances. Hence, be careful while taking a car loan and take as much loan as you can afford.
There is a popular formula in the world of finance regarding car loans. This is called the 20-10-4 formula. Keep this formula in mind while taking a car loan and take the loan accordingly. If you do this, you will be able to pay EMI easily.
- What is the 20-10-4 Formula?
The 20-10-4 formula says to buy a car with a down payment of at least 20% of its cost (on-road). Then the remaining amount is his loan. 10 in this formula means that the EMI of the loan should not exceed 10% of your monthly income.
For example, suppose you earn Rs 1 lakh every month, then your EMI should not exceed Rs 10,000. Again, the 4 in the formula means that the tenure of the loan should not exceed a maximum of four years.
It is also suggested here that if you can increase the down payment by 20%, then increase it, it will be more convenient to repay the loan as your loan amount will be reduced.