One Time was when buying a car used to be a luxury. But now a car has become a need for people. If you are employed, banks easily offer car loans. But customers should keep in mind that the car is a depressing asset. If you are not using the car commercial, then its value decreases over time. As soon as the new car comes out of the showroom, its price starts to decrease. In such a situation, the car loan should be minimal duration. Now many people will have the question in which budget car will be the most suitable for them and how many rupees car loans should be taken. For this, you can follow the rule of 20/4/10. Let us know what this rule says.
What is the rule of 20/4/10?
This rule tells the customer how much money and how much a car loan should be taken. This rule responds according to the financial situation of the customer. According to this rule, you can afford a car when you are meeting these three needs:
- According to the 20/4/10 rule, while buying a car, you should pay at least 20 percent or more as down payment. If you can do this, the first need of the rule is fulfilled.
- The rule of 20/4/10 states that customers should take a car loan for 4 years or less. That is, the loan duration should be maximum 4 years. In this way, you buy the same car, whose loan you can pay within 4 years.
- The rule of 20/4/10 states that your total transportation cost (including EMI) should be less than 10 % of your monthly salary. Transportation costs include fuel and maintenance expenses besides EMI. Now you buy the same car in which you can meet these three needs.
Interest rate on car loan
Different banks are offering different interest rates on car loans. For example, SBI’s interest rate starts from 9.10 percent. Canara Bank is offering 8.70 per cent interest rate on car loan. HDFC Bank’s interest rate is starting from 9.40%. At the same time, ICICI bank is offering a minimum of 9.10% interest rate on car loan.
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