Buying a car today is still a dream for most people in this country. This dream has now become a far reality as the prices of cars continue to rise and the quality of new cars is on a downfall. This ironically makes it very difficult for middle class families to purchase new cars. This has now led to Standardization of the used car market.
Still paying for a used car up front is not possible for most people; hence we are here to help you find the best interest rates on a second hand car loan.
The following are factors which will help you get the best interest rate on a used car loan.
Age of the car
The person buying the second hand car needs to make sure that the car is between three to five years old as getting a car older than five years may increase the interest rate of the loan, which will in turn increase the EMI which he requires to pay every month.
The bank also considers the car as collateral for the loan. If the borrower fails to pay back the loan, the bank is able to sell the car and recover its lost money. Hence the newer the model of the car the more money the bank will be able to recover.
The person availing the loan must have a credit score of more than 700 to make sure that he gets the best interest rates available. A high credit score gives Bank an assurance that the loan will be paid on time without any default. If the borrower does end up paying back the loan on time then it is going to improve his credit score and help him get better interest rates the next time he wants a loan.
The higher the down payment while purchasing the car, the lower will be the interest rate on the loan.
The steadier the income of the person obtaining the loan, the lower will be the interest rate on the loan as the bank is able to see how much the person is generating each month, and the bank is able to assess. If there are going to be any defaults.
Long term loans
The loans for purchasing used cars are available up to a period of seven years. It is advisable if a person is able to draw out a longer loan from the bank as long loans have lower interest rate as compared to short term loans.
Fixed interest rate vs floating interest rates for a used car loan
If the borrower chooses to opt for a fixed interest rate it means that the interest rate of the loan remains constant throughout the year and is not affected by any market fluctuations. However, if the borrower chooses to opt for floating interest rate, it means the rate of interest is going to change according to the conditions of the market. At the time of availing of loan it is important for the borrower to choose wisely which option of interest rate suits his needs and if the lender allows him to switch from fixed interest rate to floating interest rate or vice versa according to his requirements.
The above mentioned factors are going to help you to get the best interest rate on your used car loan. This in turn will help you beat depreciation and get the best value out of your car.