How To Get A Low Used Car Loan Interest Rate?

How To Get A Low Used Car Loan Interest Rate?

We all know about car loans that are available when we are buying new cars from a particular car showroom. As per market research, a lot of people also choose to buy used cars. There are several reasons for that ranging from a tight budget to improving driving skills or simply because it is a good deal. Although, one may also need a loan or financing when buying used cars. In recent times, you will also find quite a few options for used car loans. Choosing the right lender is definitely important and one of the most important deciding factors is the used car loan interest rate.

Numerous banks, credit unions as well as finance companies offer car loans when a person buys a new car. You have numerous financing options in that case and lenders offer a decent loan amount based on certain factors along with the actual price of the car. Due to immense competition, the rate of interest is also quite low and you will barely see a wide gap of difference amongst the rates charged by different lenders. 

Used car loans are relatively new, especially in the Indian market. While banks, finance companies, and other lenders are slowly expanding into the field, used car loans are still pretty much unexplored both by customers as well as businesses. That being said, there’s definitely a lot to know about used car loans and the kind of financing options you can actually utilize when buying a used or secondhand car.

Everything You Need to Know About Car Loans: 

In the next part of this article, we have talked about everything you need to know about used car loans. From why and how the interest rate matters to the process of actually getting such a loan as well as getting the loan at a low-interest rate, read on to find out all you need to know. 

What Affects The Interest Rate of A Used Car Loan? 

It is quite simple, the higher the interest rate of a car loan, the more will be the total cost of your car. Anyone buying a car, be it a new or a used one would want the lowest interest rates on their car loans. That being said, used car loan interest rates depend upon a variety of factors. Let us take a look at the key factors that affect the interest rate of a used car loan. 

  • Credit score: The credit score of the borrower determines the rate of interest on such loans. The more the credit worthiness of the borrower, the bank or lender will charge the lower interest. Although there is ofcourse a minimum percentage which varies from time to time in India. 
  • Higher the down payment means lower interest and overall cost of your car: If the principal amount of loan you need to borrow for buying a used car is lesser, you will have to pay a lesser rate of interest. 
  • Short repayment tenure: The longer the duration of the repayment of loan, the more costs you will have to incur in the form of interest on the loan. 
  • Steady job and monthly income: a steady job and monthly income makes you more creditworthy and reflects upon banks and lenders that there are less chances of default. This can influence them to offer you better rates of interest for such loans. 
  • Low Debt-to-Income ratio: If you have a low debt to income ratio, which means the amount you pay on a monthly basis in the form of EMIs for loan repayment is much lower than your income, you have better chances of securing the loan at more attractive interest rates. 
  • Vehicle Age and Model: For a car loan, the security is the car you are buying itself. So lower interest rates are offered for newer cars and it may also be low if the car is from a reputed manufacturer with more market value. 
  • Relationship with the lender: If you previously took a loan and paid it on time, then a particular bank or lender may prefer you as a customer and offer you lower interest rates on used car loans. 

Applying For Used Car Loans

Applying for used car loans is pretty hassle-free in today’s time. You can do it at the dealership from where you buy the car, or you can do it online by yourself. Here, you can also visit the bank or lender and apply for the same. You would need some basic documents which include: 

  • ID proof
  • Address Proof
  • PAN card 
  • Aadhar card 
  • Employment details 
  • Homeownership or rental status
  • Monthly income and proof of the same
  • Details of the car you intend to buy

With all that, you can easily get a used car loan. Not just that, if you keep in mind the factors that affect used car loan interest rates, then you might as well get a loan for buying a used car at low-interest rates!