Are you someone who is planning to buy that first car you always dreamt of?
Buying your first car requires you to make a huge. In the present conditions, with inflation rates going higher, it is always advisable to carefully assess your buying decisions before actually putting them into practice.
With the increase in car prices, the most to be hit is the middle-class lot. In that case, the only way to beat the price heat is to go for a second-hand car. And the best way to finance the purchase is through a second hand car loan.
According to the reports published in ‘Business Today’, one of the leading car manufacturers, Kia India, has increased the prices of its cars by 24.84 %. On the other hand, Toyota has increased its car prices by 4%, which happens to be the second price hike in 2022.
What impacts the interest rates of used cars?
Getting a loan to finance your second hand car is not a big deal at a time when there is a wide range of financial institutions to choose from. The average rates for a used car loan range fall between 9% and 15%.
Now let us look at some of the factors which impact the interest rate of used cars in the country.
Model of your car
While taking a second hand car loan, the vehicle you wish to purchase will be taken as collateral by the financial institution. If you commit a default on paying your loan EMI, the bank has the right to take your asset into possession. Therefore the financial institution takes into consideration the model of your car to ascertain its value, and the interest rates are decided.
Debt to income ratio
Debt to income ratio is the difference between your earnings and your liability. It speaks a great deal about your repayment capacity. Financial institutions assess your debt-to-income ratio before giving you loan. If it is found to be higher, then the loan application will be rejected. On the other hand if your debt to income ratio is good, then you can avail the loan at better interest rates.
Your Income
The financial institution will make a note of your income to ascertain your repayment capacity. If you have a stable income, getting a loan will be easy. The amount of loan given becomes directly proportional to your income and in turn, impacts the interest rates.
Your credit score
A credit score talks a lot about your commitment to repayment. A good credit score can always help you to get a loan easily with reasonable rates. If the score is low, there is a chance that the interest rate will be high.
Rapport with the financial institution
Relationships always add value to the business and the customer. If there exists a significant amount of trust and understanding between you and the financial institution, then you are in a better position to bargain for the best rates for your loan.
Why go for a used car loan?
Opting for a used car loan is easier than you think. It comes with its own benefits. Some of them include:-
- Easy documentation
- Low insurance costs
- Low-interest rates.
- Minimum documentation
- Longer tenure for payment
Know your used car loan eligibility
Your loan eligibility speaks more about whether or not you are qualified to go for a second hand car loan. Any financial institution would find it necessary to assess your eligibility before granting a loan to you. Doing so will help it to understand your position as a borrower, based on which it can make lending decisions.
The eligibility criteria for granting a used car loan are all the same with any financial institution across the country. However, let us look at it in detail to understand it better.
- You have to be 18 and above.
- You should be a resident of India
- A work experience of 1-2 years is mandatory.
- If you are a self-employed individual, you have to be in the business at least for 1 year.
Raising your criteria can help you get your first loan easily. Therefore, it is better to assess your used car loan eligibility before actually going forward to buy your first car.
Conclusion
Having gone through the article, you must have made up your mind to go for a second hand car loan. Then what are you waiting for? Know your used car loan eligibility. Given the economic condition prevalent across the country, this is the best time to put your plans into action. There are many financial institutions that can offer you a loan with:-
- Hassle-free approvals
- Low-interest rates
- Easy documentation
- Prompt customer service
- Flexible terms
