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					            Car Loans - Important Things to Know
Car loans have come up as a great boon for people with fixed income who cannot afford a
car on cash. They just need to pay the initial payment - a small part of the total price and
take home the car. The balance amount is to be paid in small installments over a certain
period of time. The loan lending organization charges certain interest on the loan amount
granted. This way one can have a car of his own right now, instead for waiting for few years
to save money for entire amount and then buying one. With the increase in number of
potential loan lenders, competition is on the rise and thus better deals are on offer for
customers to grab. Certain financial institutions even offer loan at 0% rate of interest.

However, there are certain important things one must keep in mind before actually going in
for a car loan. One is the opportunity cost. If a salaried person with fixed income takes up a
loan he pays a fixed monthly installment to repay the same. During the time of loan
repayment he might want to invest in another area as well, but is not able to do so because
of his current commitment to car loan. There is a loss of opportunity for him.

Secondly, the value of a car decreases as soon as it leaves the showroom. Thus, while one
is paying installment against car loan, the vehicle's value is also getting depreciated. Also,
even if the loan amount has been paid back one need to spend on maintenance of vehicle.
An aged vehicle calls for more maintenance cost.

One obvious disadvantage is that you pay about 20-30 percent more if you take a car loan
as compared to buying it on cash. Also, if the date of repayment gets extended the interest
rate rises. Over a period of time the total money spent by you might be much more than
the loan amount. In case one is not able to repay the loan, the lender can sell off the car to
recover his dues. He also gets to keep the over and above of debt amount.

Car loan is thus a great option for those who cannot buy a car on cash. But it has certain
disadvantages as well which are generally kept in secret and customers are not aware of
them. One needs to check all the pros and cons and the details of offer given by loan vendor
before taking up a loan so that he does not feel betrayed.

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