While buying a used car, you can apply for a loan if you want to avoid the stress of paying the entire amount at one go. You may be having other regular expenses and paying a lumpsum may affect your overall budget. Car loans are available on almost all models of used cars and you can get them at both banks and non-banking financial companies. Repay the loan through Equated Monthly Instalments (EMIs) over a specified period of time. But there are differences between the interest rates. Read on to know how to get a loan on second hand cars at low interest rates.
To get a lower interest rate on used car loan, keep in mind certain factors that include:
Making a higher amount of down payment
If you apply for almost 100% of the car’s price as loan, you may have to pay a lower amount of down payment but this would mean that the total interest amount that you have to pay would be high. It would mean an upfront saving but would ultimately increase your EMI. So, one of the ways you can get a lower interest rate would be that you pay a bigger amount of down payment.
A good credit score
The credit score gives information about your credit history, credit behavior, past loan repayment details etc. The lenders would go through your credit scores in most cases to determine whether you are eligible to get a loan and the percentage of interest rate that they would charge. If you have a CIBIL score above 750, it is a good one. In this case, you can bargain for a lower interest rate on the loan on second hand cars with your lender. If the CIBIL score is lesser, take necessary steps to improve it like paying your credit card bills on time or paying off your existing loan EMIs without default.
Loan tenure or repayment period
The loan tenure also affects a used car loan interest rate. If you go for a longer loan tenure, the interest rate would be higher. Lenders consider a longer loan tenure to be risky as it may lead to defaults or non-repayments. So, they charge a high interest rate on a loan with long repayment period. Plan your budget in such a way that the loan tenure is short. Your EMIs may increase, but the total interest amount would go down. Some lenders may offer a flexible repayment tenure, so that you can repay back the loan at your convenience.
You will find use a used car loan EMI calculator on the lender’s website. You do not need to login or create an account for using it. The EMI calculator is a convenient tool to get the accurate amount of EMI, interest rate and loan tenure before you finalise your loan application. Just put in the required details and get the details. You can increase or decrease the loan tenure, loan amount, etc. to get an interest rate that would be the lowest.
Compare between interest rates offered by lenders
When you plan to apply for a used car loan, do some research initially. Go through the websites of various lenders to see who is offering lower interest rates. Compare between the interest rates and select a lender who would charge the least. You may also find seasonal discounts, festive offers and schemes by different lenders at specific times of the year. To get a lower interest rate, you may take advantage of these offers. There are also several quotes comparison websites where you can compare the car loans and interest rates offered by different lenders online.
Car loans are convenient while buying a used car as they can relieve you off the stress related to the funds required for purchase. However, there are differences between the interest rates offered by different lenders on the loan amount. Go through the factors that affect the interest rate of a loan on second hand cars before you apply for loans. Some of them are a good credit score, shorter repayment tenure, etc. A good understanding of these factors would help you in getting a lower interest rate, so that you can save on the repayment amount.
Used car finance rates:
They vary from 10%-15% depending on the financial companies disbursing it.
Buy the model and kind of car: It is critical that you select a vehicle that meets your requirements while remaining within your budget. Before issuing a loan, many financial organizations look at the model’s age and type. As a result, it would be advantageous if you chose an automobile that is relatively modern in model and design.
Calculate the overall cost of your car as follows: After you’ve decided on a car model, you’ll need to figure out how much money you’ll need to put down on the transaction. If you’re paying a lump sum as a down payment, be sure you have the funds in place before you buy the car. After the computation, you’ll have a good estimate of how much money you’ll need.