Home Finance Things to Know Before Getting Loan to Buy a Second Hand Car

Things to Know Before Getting Loan to Buy a Second Hand Car

by jhon duncen
second hand car

Getting a second-hand car is the best option to own your dream car without putting a lot of burden on your finances. With the money you can buy a new car, you can get a second-hand vehicle and take two international trips to your favourite destinations. The best part is that with a pre-owned vehicle, you do not have to compromise on the brand and model of the vehicle. 

In this era of financial instability, not everyone can afford to buy even a used car. But, the good news is that you can apply for used car finance to buy your dream car without touching your savings or investments. It is probably the best option to manage your finances, and you do not even have to pledge anything as security. You can secure up to 100% of the vehicle as a loan, and with affordable second-hand car loan interest rates, making timely repayments is easy. 

Here are the top things to know before applying for second-hand finance: 

Know your credit score 

Your credit score is one of the vital aspects of your loan application. It determines whether or not your lender should trust you with second-hand car finance. You can still get a used car loan even if you have a low credit score, but you will have to incur a higher second-hand car loan interest rate. The minimum CIBIL score requirement to get a second-hand car loan is 750.

Compare your options

Before getting used car finance, it is imperative to get quotes from all dealerships you visit. Shop around and find a lender that offers the best deal available. Make sure to compare the loan amount, interest rate, and loan tenure you can get. Get financing quotes from at least three to five dealerships or companies. This way, you get to find a deal that best serves your needs. 

Go for a shorter repayment tenure

The best part about choosing a shorter repayment tenure is that you can end up saving more money in the long run. Although your EMI amount will increase a little, you will pay interest over time. If you choose a longer loan tenure, say five years, you will incur a higher interest rate. Lenders usually charge higher interest rates for longer tenure due to the risks involved. Besides, you may end up with a car that is not worth the money by the time you pay it off. 

Also Read About: Benefits & Advantages of Two Wheeler Loan During Covid-19

Choose a higher down payment 

Not all lenders offer 100% of the vehicle’s value as a loan. You may get up to 80% or 90% of your preferred used car’s market value as a loan. It means that you will have to pay the remaining 10% or 20% as a down payment. When you pay more money as a down payment, your loan amount decreases. As the loan amount decreases so does the rate of interest.  So, if you have the budget, choose a higher down payment to reduce the cost of borrowing. 

Pay for other fees in cash

Besides second-hand loan interest rates, other fees include dealership fees, documentation fees, sales tax, etc. Your dealership may advise you to add these fees to your loan, but that will only increase your loan amount and the interest rate. So, It is imperative to pay these fees and taxes in cash than rolled into your loan.

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