Tips To Get Used Car Loan at Lowest Interests Rate

If you are buying a car for the first time, it is better to buy a used version of the same car at an affordable price than get a new one. With the price that you can get a new car, you can take two international trips and yet be able to buy a used car. Imagine that! Furthermore, you can also apply for a loan for a used car if you do not have other means to manage your finances. 

You can get a used car loan to manage your finances without redeeming your savings or investments. You can secure up to 90% of the car’s market value as a loan. With affordable interest rates, it is easier to repay the loan amount within stipulated EMIs. However, the used car loan rates depend on several factors, such as your income, credit score, loan amount, loan tenure, etc. 

Here are the best ways to get a loan for a used car at the lowest interest rate: 

• Choose a lower loan amount 

The loan amount that you choose directly affects your interest rate. Your lender allows you to get up to 90% of the used car’s value as a loan, but that does not mean you should go for a higher loan amount. If you choose the maximum loan amount, you will have to incur higher used car loan rates.  So, if you wish to get a lower interest rate, it is advisable to choose a lower loan amount.  The lower you ask for, the better are your chances of securing a better interest rate. 

• Maintain an excellent credit score 

Your credit score is another crucial factor affecting your interest rate. Your lender checks your credit score to determine whether or not to approve your application for a loan or even give you better interest rates. To get lower used car loan rates, you will need to maintain a minimum CIBIL score of 750. Also, the higher the credit score you maintain, the better are your chances of securing the lowest used car loan interest rate.

• Compare lenders 

Another way you can get the lowest interest rate on your used car loan is by comparing lenders in the market. Not all lenders offer the same used car loan rates. So, it would be wise to shop around and compare at least three to five interest rates. This way, you will be able to choose an interest rate that best serves your needs.  

• Make a higher down payment 

Your lender may not offer the entire value of your vehicle as a loan, which means that you will need to pay a certain percentage of it as a down payment. For instance, if you are getting 80% of the vehicle’s market value as a loan, you will need to pay the remaining 20% from your pocket. Keep in mind that the higher the down payment, the lower will be your interest rate. Make sure to pay at least 30% of the vehicle’s worth from your pocket. 

• Choose a shorter loan tenure 

Another factor that has a direct impact on your used car loan rates is repayment tenure. Your lender will offer you a loan tenure that ranges between 12 to 60 months. But, you must choose a loan tenure that best serves your needs. Generally, lenders charge a higher interest rate if you choose a higher loan tenure to justify the risks involved. 

If you have the budget, it is advisable to choose a shorter loan tenure. Your EMI amount may increase, but you will be paying a lower interest rate. It is a great way to lower the total cost of borrowing. 

Conclusion 

Getting a loan for a used car is probably the best decision you can make to manage your finances. Since you have to pay interest while repaying your loan, it is better to pay heed to the above-said tips to avail of the lowest interest rate.

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Created on Jan 13th 2022 03:25. Viewed 195 times.

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