Merc On Your Mind? Taking A Loan? Follow These Steps To Clear The Loan Efficiently

Almost every teenager would have dreamt of owning a Mercedes or a BMW. Luxury bikes and cars are always on the wish-list of almost every urban Indian. After the globalization, the affordability and feasibility of owning such a vehicle is closer to reality. But most of us do it in the form of car or bike loans. Various car dealers and manufacturers are also looking to clean out the inventory this financial year, so you might even get lucky if you bargain hard enough for discounts. With finance minister announcing the cut in excise duties last week, this might just be the right time to buy a car.

It is one thing to own a luxury car, but another to maintain it. So when you buy such a vehicle keep a tight plan in mind towards repaying the debt. Here are a few steps to keep in mind:

1) Get clarity on total expenses: When you decide to buy a Mercedes or any other luxury car, ask your dealer for a quotation with all your requirements. With a lot of accessories road tax and registration costs, the total price you pay for your dream car may be different from the amount you borrow from your bank. When you ask for a quotation, you get to know how much is the total cost you have to bear, that way you are mentally prepared to face the costs. You should also take into account the maintenance charges, fuel charges etc. that you will bear on a recurring basis. Your car is a depreciating asset, so you should take a hard look at your overall finances before you go ahead and buy that dream car of yours.

2) Make a repayment plan: Set a target to repay your loan. Get your Cibil Score – make sure that your report is error free and your score is greater than 750 at the very least. This will give you some bargaining power while negotiating interest rates with the bank. While the loan given to you comes with a defined tenure, it is important for you to target a foreclosure. Foreclosure needs a lot of planning. Ensure you keep a target and stick to it, else you may get into a debt trap.


3) Divert the additional funds towards loan closure: it may be a bonus on any of your Mutual funds investment or tax returns or even birthday gift money. Use them to clear your loan swiftly.

4) Look for additional income: This is what Bharat Sengupta, a Mumbai-based computer graphics artiste did. “I bought a Harley. It was on 3-year loan. As long as the loan was there I took up freelance work and paid it within 18 months,” he said. Today he is elated to cruise around the countryside on his Harley Davidson without any worry of loan burden.

So keep these tips in mind while buying those childhood dream cars and bikes. Live a worry free life after you clear your loans.

Rajiv Raj is the Director and Co-Founder of www.creditvidya.com
Image Courtesy: ThinkStock