5 Things To Keep In Mind Before Taking A Used Four Wheeler Loan

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Buying a car is one of the most exciting and thrilling experiences of life. It brings with it a sense of identity and status, and these days, it is also a necessity to own a car. Due to the COVID-19 pandemic and the social distancing norms, it is safer to commute in your car than in public buses. Getting a car means that you and your family members are safe from exposure to the virus. But, with the financial instability induced by the COVID-19, not everyone can afford to buy a new car. Therefore, a second-hand car seems to be a better option. You have multiple choices available, and you can get your dream car and make two international trips from the money of a new car. Besides that, you can also get a second-hand car loan to manage your finances and avoid putting any burden on your savings or investments.

Reason to opt for a second-hand car loan 

A second-hand car loan is the best option to buy your dream vehicle without putting any financial stress on your shoulders. You can get up to 80% to 90% of the vehicle’s insured declared value as a loan, and the used car loan rates start from as low as 8.5%. You can choose a repayment tenure between 12 to 60 months based on your needs and preferences. It allows you to buy a car without worrying about the shortage of funds.

Things to know before applying for a second-hand car loan

Before getting a used car loan, you must be well searched about the used car loan rates, loan amount, repayment tenure, etc to make an informed decision.
  • Interest rates
One of the first things you must keep in mind before applying for a second-hand car loan is the interest rates. It varies across all lenders and generally ranges between 8.5% to 15%. When opting for a second-hand loan, check different lenders and their interest rates offered. Compare multiple used car loan rates and choose one that best fits your needs. Also, it is worth noting that the interest rates depend on your eligibility factors such as your age, income, credit history, current financial obligations, etc. If you wish to secure a lower interest rate, you will have to show that you have a stable income and a healthy credit score.
  • Loan amount
Through a second-hand car loan, you can get up to 90% of the car’s insured declared value as a loan. However, choosing a higher loan amount can put a burden on your finances as the interest rate on a higher loan amount is always high. A golden piece of advice would be to choose a lower loan amount. The lower the loan amount, the lower your interest rate. So, before applying for a used car loan, make sure to assess your needs and affordability. Choose a loan amount that you can afford to pay in EMIs.
  • Down payment
After choosing your preferred loan amount, it is imperative to make a down payment. Lenders will offer you a certain percentage of your car’s value as a loan, which means that you will have to pay the remaining amount as a down payment. For instance, if you are offered 90% of the car’s value as a loan, you will have to pay the remaining 10% as a down payment. However, if you wish to lower your interest rate, it is best to make a higher down payment. This way, you can keep your EMIs manageable.
  • Loan tenure
You have the flexibility to choose between 12 to 60 months to repay the loan amount with interest. Some lenders may even offer a loan tenure of up to seven years. But, make sure to avoid stretching your loan tenure because the longer loan tenure you choose, the higher interest will be charged by your lender. Lenders usually charge higher interest on longer loan tenure to justify the risks involved. It would be wise to keep your loan tenure within three years.
  • Second-hand car loan EMI calculator
Before applying for a used car loan, always use an EMI calculator available on your lender’s website to assess your needs and affordability. With the second-hand car loan EMI calculator, you can determine how much you can afford to pay in EMIs based on three components – loan amount, interest rate, and loan tenure. If the EMI amount is not satisfactory, you can change the value of the said components to figure a suitable EMI for yourself.
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