Planning to buy a new car? Have you followed a 20-4-10 rule?

Planning to buy a new car? We end up going for luxurious cars without managing our finances due to the easily available car loans. It makes our Equated Monthly Installments ("EMI") higher and impedes a little imbalance in our expenditures. Therefore, the best formula is to follow the 20-4-10 rule while buying a car. Decide to buy a car only if you can manage this 20-4-10 rule wisely; 

1. You should be in a position to pay at least 20% of the on-road price of the car as a down payment. Suppose, if the car costs you INR 10 lakh, then pay at least INR 2 lakh as a down payment. Take a car loan for the rest of the amount, I.e INR 8 lakh.

2. Ensure that the total tenure of the car loan doesn't exceed 4 years. Your EMI may be higher but good to keep your tenure short. 

3. The EMI must not exceed 10% of your monthly income. Suppose if your income is INR 1.5 Lakh per month then your EMI must not exceed INR 15k per month.

Ensure you analyse to be falling in the above mentioned criteria before you plan to take this big decision of your life. It will create less burden on you.

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