What is the tenure period of a car loan?

What is car loan tenure?

Car loan tenure is the time you are going to be spending in paying back your loan. Before you jump to conclusions, let us understand the concept a little bit. Car loan tenure is the tenure you have to pay the entire amount till you can complete all the instalments. 

Before considering the car loan tenure you should know how long your loan should be. Here is a quick guide to help you choose the right loan tenure. 

How long should you pay for a car loan? 

After you take a car loan, the first question you need to ask yourself is 'how long should I pay for a car loan'. Example: A car loan with a tenure of 20 years, and the amount is for INR 1,30,000 per month. Assuming that your loan tenure for three months, you will have to pay INR 43,333. If your loan is due for six months, you will be able to pay INR 21,666. If your loan is due for nine months, you will be able to pay INR 14444. And finally, if your loan is due for 12 months, you have to pay INR 10,833. But the thing that people often forget is that you also pay the interest rate along with your loan amount. 

What are the factors which affect car loan tenure? 

The following factors can affect the car loan tenure: 

1. Your credit score. 
2. Your current monthly income. 
3. The purpose of the car loan. 
4. Your location. 
5. The kind of car you want. 
6. The condition of your credit.

What should you consider when you choose car loan tenure?

It's a dream to own a car. But when you want to buy a car and fulfil your dream of owning a car, the purchase becomes challenging. Whether you're the one who's going to take a loan or someone who's going to get the loan from a bank, you want to choose a car loan tenure that suits your needs. Once you choose the car loan tenure, you don't have to bother about the loan amounts anymore. 

Car loan tenure is important. However, one thing that you need to take into consideration while choosing a car loan tenure is the interest rate of the car loan. An interest rate of 12-18 per cent is normal for 2-3 year of tenure. But if you want to plan your car's purchase and you are looking for a car loan for 7-10 year tenure then you should choose a bank that provides a low interest rate. Because you will pay the Car Loan Interest Rate along with the car amount every month. So if you choose a long tenure with a high interest rate, you may end up paying more than the loan amount. 

The right car loan tenure for you:

As a car loan holder, you should be very careful about choosing the right car loan tenure. Remember, no other loan can be as harmful as a car loan. Choosing the right car loan tenure is important. So choose the loan tenure according to your repayment capacity. Always choose the loan amount as 50% of your monthly income. Some banks (like Yes Bank Car Loan or BOB Car Loan) usually take 60% of your monthly income as EMI. \ So if your monthly income is INR 1,00,000 then your monthly instalment shouldn’t be more than INR 60,000.

Conclusion: Thus, this article concludes that you should definitely consider a shorter car loan tenure. Now you must know that there is more to choosing the right car loan tenure. It's not only about paying the balance in your car loan but it is also important for you to get a car loan that will meet your income and budget capacity. Because if you’re unable to pay the loan amount then your car will be seized and sold off at an auction to recover the loan amount and the interest rate.

Also Read:- Who Is Eligible For A Car Loan?