How to Evaluate Used Car Loan Interest Rates Before Availing a Loan

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Owning a car hasn’t ever been easier than today. These days, with the varied options of finance available, owning a car has become only a matter of decision. With the onset of the COVID-19 pandemic in 2019, all industries took a hit, and the automobile industry was no exception. The manufacturing of new vehicles slowed down tremendously, leading to a vast gap between supply and demand. This led to the growth of an already existing used car industry. Earlier, only luxury cars sold like hot cakes in the used car market, but now cars from across segments have been added. 

What’s more — most financiers give used car loans to finance the purchase. The most significant advantage of going for a used car is that you can get a taste of the fast-evolving automobile market without feeling the impact on your savings. With used car loans available, you can own a certified car, without worrying about erosion in savings.

The financiers give attractive used car loan interest rates to make the experience hassle-free. With the onset of digital, comparing the options online is easier than ever before. Most lenders finance 70-80% of the used car value, and the remaining amount has to be brought in by the purchaser as margin money.

Before you go with a specific deal, it’s important to know the factors that affect the used car loan interest rates:

1. Loan amount

The amount of loan that may be approved depends on the valuation of the used car done by lenders. The Loan to Value (LTV) ratio varies from lender to lender. Some lenders finance only 75-80% of the car’s valuation, and some provide up to 100% of finance as well. Also, some lenders operate specifically in a particular segment. Though the tenure of a used car loan is five years, it depends on the age of the car. Here, it should be kept in mind that used car loan interest rates are ideally higher with a lower LTV ratio than a new car loan.

2. Credit score

Used car loan interest rates are linked to your credit score. You can check your credit score online to have a fair idea of the best rate you can expect. To get the best used car loan interest rates, ensure timely servicing of your existing liabilities and maintain a good credit score.

3. Loan tenure: 

The rate of interest is generally higher for a longer tenure. Opt for a lesser term of a loan to get the best rates. With the help of used car loan EMI calculators online, you can check your proposed EMI with different permutations and combinations.

4. Existing relationship: 

Financiers extend special rates of interest to salary package customers or existing home loan/ car loan borrowers. If you have a salary account with a certain bank or financial institution, or you have an ongoing credit relationship with the bank, you may be eligible for specific discounts or privileges over and above the rest of the customers. This may translate into a lower cutoff for CIBIL score, lesser interest rate or waiver of processing fees.

Conclusion:

With these pointers, you can evaluate used car loan interest rates and get the best available for your deal. To finalise the best option for you, you can compare the different financiers. Before availing of a used car loan, the priority should be to get the lower interest loan. Keep in mind the above pointers to make your journey of owning a used car smooth and hassle-free along with getting the lowest interest rate.