Planning to buy a car? Use the age-old 20/4/10 rule to avoid debt trap

Don't over-leverage when buying a car

• To make the most of your vehicle, use the age-old 20/4/10 personal finance rule. 

• 20 stands for the minimum percentage you should pay as down payment. This will decrease the overall cost of your loan.  

• 4 means you should finance a car for no more than four years. If you opt for a longer tenor, you will end up paying more in interest cost. 

• The sooner you close the loan, the earlier you will become the owner of the car. Until then it will be hypothecated to the lender. 

• 10 stands for the maximum percentage of your monthly income you should shell out for your car EMI.  

• Ideally not more than 30-35 per cent of your take-home salary should go towards servicing all your debts.