Nowadays, more and more people are resorting to buying used cars. The overall inflation impacting the automobile industry has made way for the market boom for used cars. Since used cars also go through extensive quality checks and come at lower prices, potential car buyers are more inclined towards buying one.
Apart from selecting the right car, one of the crucial steps is to find trustworthy lenders who can guide you about finance for used cars. Don’t know how to begin with the lender search? Sit back and watch this space!
Salient Features of a Used Car Loan
Before jumping into the technicalities of finding an appropriate lender, let’s have a glance at the features of used car loans. This will make sure you don’t fall for the trap of lenders while financing a used car. Some features are as follows:
- Less loan amount is availed in comparison to new car loans
- Monthly EMIs are low due to lesser loan amount
- The repayment tenure is long
- Hassle-free online finance procedure
- Negligible paperwork is involved
- Repayment terms are flexible
- Insurance costs are somewhat lower in comparison to new car loans
- Interest rates on used car loans are higher
How to Find a Suitable Lender for Used Car Loans
Once you have narrowed down your second-hand car choice and from whom to buy the car, the next step should be to look for lenders. Essentially, a suitable lender must encompass all -from providing your best deal to managing the finance for used cars. Whether you are planning to borrow from a bank or a private lender, here are some factors you should compare before zeroing in on the deal:
Important Note: You need a whole lot of research work, to begin with. If you are unwilling to undertake one, chances are that the used car may cost you big bucks.
- Compare Interest Rates
We cannot emphasise enough how important this factor this. Usually, the interest rates on used car loans are comparatively higher than the new ones. That’s because of the depreciation that has already occurred on its cost. Consequently, the lenders provide used car loans at a higher interest rate. For you, the catch lies in comparing the interest rates offered by different lenders before approaching one.
- Compare The Loan Tenure
Although the repayment loans are somewhat flexible and long in the case of used car loans, it largely depends on your credit score. If you maintain a good credit score, stable income and consistent employment, then the loan provider can conveniently process your application with surety.
No matter if you choose a bank or a private lender, the idea is to negotiate your way for landing a longer loan tenure for you to repay it with ease. Don’t forget to highlight your good credit score.
- Compare The Processing Fee
The processing fee is not a large sum of money that is to be paid but still, you should be careful while spending your money in the financing procedure. As small additional costs can add up to the overall borrowing cost, so it’s recommended to look for lenders that ask for the minimum processing fee.
To achieve success, you can either present your creditworthiness as a piece of evidence or get someone who can act as a referral for you in front of the lender.
- Compare LTV Ratio
The Loan to Value (LTV) ratio is the amount you borrow as the proportion of the value of the car purchased. Largely, the higher interest rates of second-hand cars render a low LTV ratio. To put it, you won’t be getting the loan amount the same as that of the purchase amount of the car. Although the LTV ratio differs with lenders, it ranges between 50-80 percent.
Suppose your car costs Rs 1 lakh and the lender is offering you a loan amount of Rs 50,000, then the LTV ratio is 50 percent. While looking for lenders, you should always settle for the ones that give a higher LTV ratio. Again, this can be achieved by showcasing your negotiation skills and boasting about your sincere payment history.
Financing loans are complex. But, having a good lender by your side can reduce half of your problems. In a nutshell, whenever you are planning to look for lenders who can provide finance for used cars, then make sure you skim through the strategies above to make your life a little less troubled.