Are you planning to buy your first car? If so, then getting a used car is a better option than buying a new car. The reason is that you can reduce the financial burden on your shoulders. With the money you can buy a new vehicle, you can get a used car of the same brand and model and yet be able to address other needs, such as international travel, home renovation, etc.
With the current prices of used vehicles, not everyone can afford to buy one from their pockets. In such cases, you can get used car finance to buy your dream car without dipping into your savings.
It is the best way to manage your finances as you do not have to pledge your asset with considerable value as a loan. Most lenders in the market offer up to 100% of the used car’s value as a loan. It also comes with affordable interest rates and flexible loan tenure. But, make sure to use a used car loan EMI calculator to determine your affordability before submitting your application for a loan.
Here are the things you should know before applying for used car finance:
Know your credit score
The CIBIL score or credit score is one of the crucial factors in a used car loan application. It determines whether or not the borrower can be trusted with a loan. It is a three-digit number that shows the creditworthiness of a borrower. The minimum credit score required to get used car finance is 750. However, the higher your credit score, the better are your chances of securing a loan at the lower interest rate.
Compare different lenders
Before applying for a used car loan, it is crucial to get quotes from different dealerships. The loan amount, interest rate, and loan tenure vary across different lenders. You must find a lender that offers the best deal available. It is advisable to get financing quotes from at least three to five dealerships or financial companies. This way, you can find a lender that best serves your needs.
Opt for a shorter repayment tenure
The repayment tenure has a direct impact on the EMI amount. The longer the repayment tenure, the higher will be the interest. Lenders generally charge higher interest rates on longer loan tenure to justify the risks involved. Also, you may end up getting a car that is not worth the money by the time you pay it off. So, if you wish to secure a lower interest rate, it is better to opt for a shorter repayment tenure.
Choose a higher down payment
Although lenders offer up to 100% of the vehicle’s value as a loan, you may not be eligible to get it. You may be able to get up to 80% of the car’s market value as a loan. It means that you will have to pay the remaining 20% as a down payment.
It is advisable to pay a higher down payment towards your used car loan. A higher down payment leads to a lower loan amount, and a lower loan amount decreases the interest rate.
Pay other fees in cash
Besides the interest rate, your dealership may advise you to add dealership fees, documentation fees, sales tax, etc to your loan. But, it is worth noting that any addition to your loan will increase the loan amount and interest rate. So, it is better to pay the said fees and taxes in cash than add them to the loan.
Also, before applying for a used car loan, it is imperative to use a used car loan EMI calculator to determine an EMI amount that you can afford to pay every month. Apply for a used car loan today and bring home your dream car at a fraction of the cost of a new one!