Manufacturers introduce new car models every few months. Every model is better than the other with new features, the latest design, and style. No wonder, your car starts to feel old within a couple of weeks. This is the reason why many people prefer buying used cars. The used car sector is growing in every country and the used car market is even bigger than the new car market. Thanks to the growing societal acceptance, the emotions and joys associated with buying a used car are the same as a new car. Choosing a used car is indeed a smart move. You can apply for a used car loan to make the process of payment easier and convenient for yourself. Do not let the cost of a used car dishearten you. Choose the car you want to own and simply make a loan application. After you have decided on the mode of payment and zeroed in on a loan, you need to keep certain things in mind before making the loan application.
- Eligibility criteria: The first thing you need to know about used car loan financing is the eligibility criteria. Different lenders have varying criteria and you should only apply for a loan if you are eligible for it. You can get information about the eligibility criteria online and make comparisons. In order to apply for a used car loan, you need to choose a car that is less than eight years of age. Some lenders have a basic income requirement while many have no such criteria. You do not need to visit different lenders to know more about it. Get detailed information from the comfort of your home and then zero in on a lender.
- Interest rates: One of the most important things to consider about a loan is used car loan interest rate. Interest rates for a used car will be slightly higher than those of a new car. You need to compare the interest rates before making a borrowing decision. You can make an online comparison and get insights into the interest rate offered by different lenders. Low interest rate means low EMI and low monthly outflows. Choose a reliable lender who offers the loan at a low interest rate.
- Loan amount:Whenever you choose a car, you need to keep in mind the amount you will have to pay for it. The lender will not give you the entire amount as a loan. You will have to make a down payment for the same. Different lenders have different requirements for the down payment and you will have to adhere to it. Try to keep the loan amount low but do not stretch your budget. If you have excess funds in hand, you can make a higher down payment. But if you do not have funds, make a minimum amount of down payment and the balance will be your loan. Most lenders offer loans for about 70% to 80% of the value of the car. Higher the down payment, lower the loan amount and EMI. You need to be very careful when choosing the loan amount. It is a long-term commitment and you do not want to make any mistakes here. Consider your cash flow when agreeing on a loan amount.
- Tenure:Used car loans have a tenure ranging between 5 years to 7 years. However, it is advisable to not extend the tenure too much. With a longer tenure, you will be paying a high interest rate. Keep the loan within a tenure of 3 years and prepare a repayment schedule to ensure timely fulfillment. Enjoy low interest with a lower loan tenure.
- Loan application process:The loan application procedure is quick and hassle-free. If you are an adult with a valid driving license and a consistent flow of income, you are eligible for the loan. You can make an online application and submit requisite documents. The lender will charge a processing fee which depends on the loan amount. Hence, make sure you are aware of the charges before you file an application. You need to provide an identity proof, address proof, proof of down payment, income proof and two photographs with the loan application form. Your credit score will be considered here. If everything is in place, your loan application will be approved in no time.
- Prepayment of the loan:Many lenders offer an opportunity to prepay the loan. It saves on the amount of money you pay in the form of an interest. If you have excess cash in hand, you can prepay the loan. You need to enquire about prepayment charges before you sign on the dotted line.
You can repay the loan in EMIs over the tenure. Use the EMI calculator to get an insight into the EMI payable on the loan. The calculator is available online and is free to use. You only need to provide the loan amount and tenure to get an estimate. You can change the inputs until you reach an optimal output. The EMI will give you an idea about the monthly outflow which you will have to manage. Be practical when you agree on an EMI amount. If you need a longer tenure, you can ask for the same. Do not stretch your budget too much to make the EMI payment. Analyze your cash flow and then choose an EMI that best suits you.
Do your research and visit different car markets before you make a decision. Take a test drive and speak to your friends. Get insights into the best model that is suitable for your needs. Never rush this process. You do not want to invest in a car that requires high maintenance in the long term. Availing a used car loan is a long term commitment and you do not want to make any mistakes. Take your time and carefully choose the car and the lender. Bring your dream ride home with the right financial partners by your side.
