Purchase of used cars has significantly increased lately, whereby one of the major reasons for such an increase is the affordability that they offer.
However, one can also not ignore the fact that it is significantly convenient to finance such purchase with the help of a loan on old car.
These advances are customised and come with tailored features that make it convenient for individuals to manage their loan much easily.
The loans for used cars have come a long way today, from word-of-mouth references to major lending institutions offering them as mainstream advances.
Simultaneously, more and more individuals planning to buy a second hand car have started relying on these advances for their funding needs.
Such an increase in popularity of these advances has also led several new financiers to offer the funding, which has not only increase the competitiveness but also left a platter of options to choose from.
Such a range of offer availability can be a little confusing and leave you tight-roped. Hence, here are a few quick steps mentioned to ease your decision regarding the choice of financing.
- Select your used car model
Thanks to an increased availability of financing used car purchase, you can today look forward to owning a car of any make and model, from budget cars to the high-priced ones.
Reputed lenders today provide high-value financing of up to Rs.50 Lakh for suitable used car purchase, thus leaving you with a plethora of car model options to choose from.
As used cars come at affordable pricing, one cannot deny that some of the top-car notch models would be up for grabs with such financing.
However, you must make sure that the sale price of a car model you are seeking keeps loan repayments affordable as per your financial standing to make a wise borrowing decision for your loan on old car.
- Settle on a buying price after negotiation
As the market for used car models does not standardise the sale price primarily due to the varying resale value after depreciation, you stand to negotiate for its buying price.
Purchase of a selected used car model can either be made through second hand car sellers or even individual car owners.
However, you need to assess the condition of a used car and approximate the depreciation carefully based on all car components to determine on the purchase price.
Consequently, you can negotiate with your car seller for the final price at which to buy. Doing so shall not only allow you to buy your desired vehicle at an affordable price but also make used car loan funding less burdensome on your finances.
- Scan the credit profile you hold
An individual’s credit score, despite not being an essential eligibility criterion, remains critical to the terms secured on any advance.
It is not anything different with a loan on old car too. The credit score you hold and the subsequent credit history are significant contributors to the loan amount you are offered, the tenure available, the interest rate applicable and the likes.
Ideally, financial institutions require individuals to hold a credit score of not less than 750 to avail suitable financing.
You can plan ahead and take necessary steps towards financial discipline, which should help improve your credit score and history over the time to secure favourable loan features.
- Compare lenders for the best rate of interest
Before going forward into the features offered, it is essential to consider whether the loan’s affordability suits your financial standing or not.
Such affordability is significantly characterised by the interest rate levied on the advance. You must thus also take care to undergo a market-wide research and analysis to find a lender offering the most competitive used car loan interest rates.
Once you have narrowed down some of the best lenders with affordable rates, you can consider the features available to arrive at your suited lending institution.
Further, once selected and applied, you can also negotiate with your lender based on certain eligibility factors that your profile exceeds.
For instance, if your earnings are higher than the desired minimum monthly income, you can document all your income sources during the loan application and leverage it to negotiate for a reduced rate of interest.
- Select a suitable loan tenure
Affordability of a loan on old car is a sum of several factors, whereby the tenure secured is an essential one.
Depending on the tenure selected, your overall loan repayment liability can be impacted as the interest rate applied to any loan is calculated based on the number of months or years a loan has been availed by a borrower.
You can use a car loan EMI calculator to assess tenure suitability and decide accordingly. Note that an extended loan tenure, while reducing the immediate liability payable as EMIs, also pushes up the total repayment liability, thus making your loan costlier.
Contrarily, a shorter loan tenure opted for can increase the EMIs payable but limit the total loan liability, thus keeping your advance affordable in the long run.
Suitable tenure selection is thus about finding the right balance between immediate and long-term loan affordability.
- Go through the fine print in detail before signing loan document
Once you have applied for a loan on old car with your selected lender, the approved application will follow the issue of a sanction letter that you need to sign for further processing and loan disbursal.
The sanction letter is an offer that the lender extends to applicant based on his/her eligibility, which carries all the terms of the loan a lender is ready to agree to, including the interest rate levied, applicable charges and such other details.
You must go through the loan fine print at this stage and understand all the applicable terms for your loan before agreeing to them.
You can further negotiate on the terms mentioned based on your eligibility or proceed to agree for them and sign.
These are the essential factors that must be taken care of to secure the best offer for your loan on old car, which shall ensure affordability and easy loan management.
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Make sure to keep your financial habits in check and make timely repayments of any loan or credit card dues to ensure the best offer on your used car loan.