car There is a lot of craze seen among the people regarding this. Nowadays many banks and NBFCs offer car loans. In such a situation, you can take a car on car loan by paying a small upfront amount. But you should always buy a car keeping in mind your salary and your financial situation. Now how to know at what salary it would be right to buy a car worth up to Rs. 1 lakh, there is a rule for this. This is the 20/4/10 rule. This rule tells you what price car you can buy. Let us know about this rule.
What is the 20/4/10 rule?
The 20/4/10 rule comes in handy while taking a car loan. This rule tells you how much amount and for what period a car loan should be taken. It responds according to the financial condition of the customer. According to this rule, you can afford a car only if you fulfill these three requirements:
- According to this rule, while buying a car, you should make a down payment of at least 20 percent or more. If you can do this then the first requirement of the rule is fulfilled.
- The 20/4/10 rule states that customers should take a car loan for a tenure of 4 years or less. That means the loan tenure should be maximum 4 years. In this way, you should buy only that car whose loan you can repay within 4 years.
- The 20/4/10 rule states that your total transportation costs (including car EMI) should be less than 10 percent of your monthly salary. Apart from EMI, transportation cost also includes fuel and maintenance expenses. Now you should buy only that car in which you can fulfill all these three needs.
These tips will be useful
If you are going to buy a car, then definitely consider some things. Make as much down payment as possible. Buy the base model of the car instead of buying an upgraded model, as it will be cheaper. Consider last year’s leftover new car inventory. Keep your current car longer and save for a new car. Instead of buying a new car, you can also buy a used car.
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