Gone are the days when automobiles used to be the symbol of wealth. A car is now a need for living a modern lifestyle that provides easier mobility, safety, and comfort. Additionally, after the COVID-19 pandemic, owning a car has become essential for several significant reasons. It permits people to travel securely without using public transit while upholding social distance rules.
But not everyone in India has the money to purchase a brand-new vehicle. Despite an all-time high in demand for personal transportation, the ongoing economic downturn brought on by the pandemic has discouraged many consumers from making such pricey purchases. The market for used cars has increased in India as a result of this.
Things To Consider When Choosing A Used Vehicle Loan
As previously discussed, the availability of finance for second-hand car has made it simpler for individuals to realize their aspiration of owning a car. The used automobile finance business has expanded quickly in the post-pandemic period, just like the used car market has. With so many banks and NBFCs in India offering used auto loans, anyone may now easily finance the purchase of a “new” pre-owned vehicle.
However, there are a few considerations that one should make while choosing a used auto loan. Let’s look at them now:
Verify your credit score
Before applying to a lender for a used automobile loan, everyone must verify their credit score. The interest rate and qualification for any type of loan are directly influenced by the credit score of the borrower. One can take the necessary steps to prevent having their loan application rejected by being informed of their credit score.
Debt repayment history, credit utilization ratio, average credit age, and the number of open credit accounts are some typical factors that might affect a person’s credit score.
Recognize the car’s market value
Before submitting an application for finance for a second-hand car, buyers must be aware of the value of their vehicles. This will prevent them from overpaying for their cars. When determining the value of a used car, lenders take into account several things. These might consist of the vehicle’s age, mileage, and the condition of its body, engine, gears, and other mechanical components. Finance for used cars is typically given based on this appraisal rather than the car’s real cost.
Know the right loan amount
One should be clear about how much money one needs to borrow. The monthly EMIs would be higher the larger the loan amount. Therefore, the goal should be to choose a smaller loan amount. Nevertheless, the borrower must watch out for an excessively low loan amount. This can make them feel more financially burdened than necessary.
Take care of the down payment
Lenders typically provide loans for old cars up to 80% of their market value. The borrower is required to make a down payment on the balance. Borrowers can lower their monthly payments by raising this down payment amount.
The ability to secure finance for second-hand car with lower interest rates may also be aided by larger down payments. These elements can drastically lessen the cost of living for consumers each month.
Opt for a shorter tenure
Despite somewhat higher EMIs, choosing a shorter term can benefit the borrower in the long run. The overall amount of interest paid is reduced when one chooses a shorter loan term. The lender also charges a lower interest rate in such cases. As a result, the borrower’s entire liability is reduced. However, one should also make sure that the EMIs that ensue are well within their means. Striking a balance between tenure and EMIs is essential.
A second-hand car loan EMI calculator helps to determine how much you will have to pay each month as principal and interest on your loan over its entire duration. It enables you to select an appropriate time frame for conveniently repaying your used car loan.
Compare various lenders
Choosing the right lender is very important. Therefore, before choosing a pre-owned car loan, one must compare products offered by various lenders. Borrowers can compare multiple lenders with the use of several online tools. It is not advisable to just choose the lender with the lowest interest rate on offer. Instead, one should consider the entire features and advantages received.
Keep all documents in order
For pre-owned car loans, lenders require a few simple documents. PAN cards, Aadhar cards, voter identification cards, bank statements, pay stubs, car registration certificates (RC), and insurance copies are a few examples.
All these documents must be on hand before applying for a used car loan. The loan application may be rejected if these documents are not submitted on time.
Anyone can now realize their dream of having a car thanks to the availability of finance for a second-hand car. To select the best used car loan lender, it is crucial to evaluate loan offerings from various lenders.
Using a second-hand car loan EMI calculator to arrive at your monthly EMIs is simple – just fill in the principal loan amount, interest rate, and loan tenure. The EMI calculator provides you with the EMI amount right away, and you can then determine whether the monthly expense is within your capacity to make repayments. The loan term can be extended if this sum seems excessive.