Old car purchase is on trend these days, especially after the pandemic reeled havoc on the economy, restricting the finances for individuals across all income groups. Several crucial reasons command the increasing purchasing trends for these cars, one of them being their amplified affordability. Another relative benefit of purchasing these vehicles is that while the cost is much lower than new vehicles, one can get a used car model as good as new today and of the desired make. The availability of financing options like a loan on a used car only simplifies the purchase of these vehicles.
One needs to follow a few essential steps when availing of a used car loan for easy access to funding. Below given are some crucial steps to take before applying for a used car loan so you can access funding with ease.
Check How to Avail a Loan on Old Car with Ease
1. Compare lending institutions to find the lowest rate of interest
Your used car loan affordability critically depends on the rate of interest applied to the advance. It is thus crucial to find the lender offering the lowest rate, so you can take the necessary steps for further rate deduction. It is thus crucial that you compare loan offers from various financial institutions available in the market before finalizing on the loan on old car to avail.
One advantage of a secondhand car loan is that it is a secured advance. The presence of vehicles so bought as collateral through hypothecation ensures that the risk of lending to the financial institution is reduced significantly. Thus, you can secure a significantly low interest rate for used car loan.
2. Check your maximum loan affordability
When availing of funding, you must also make sure to check how much loan amount you can afford as per your financial standing. To check the maximum loan value a lender might agree to provide you based on your income, repayment liabilities, age, and other factors is to use a used car loan EMI calculator.
You must also confirm with your lender the eligibility criteria you would need to meet to avail of a loan on old car before applying. Undertaking all these steps helps improve your chances of fast loan approval.
3. Choose a loan amount lower than your maximum eligibility
Once you have confirmed the maximum loan value you would be able to raise as a used car loan based on your borrowing profile, it is wise to apply for a loan amount lower than how much you can avail. Doing so helps improve your chances of easy loan approval as your repayment capacity increases, helping accommodate a higher repayment liability with ease.
4. Check credit score and work on its improvement
Even though used car loans are secured advances, lenders still check the credit score of borrowers, with the ideal score being above 700. A high credit score reduces the risk associated with one’s borrowing profile, easing loan availability.
In case you hold a lower credit score than the minimum desired mark, you can take the necessary steps for its improvement, which should reflect on your score in over 6 months. It is thus desirable to take such steps at least 6 months prior to applying for your loan. Some ways to do so include making timely repayments and in full, availing of a balanced credit mix, avoiding multiple applications in a short duration, etc.
5. Check all previous vehicle ownerships closely and collect necessary documents
When purchasing a used car, it is possible that the vehicle has been passed down from multiple previous lenders with serial ownership transfer. Such aspects related to a vehicle affect its chances of approval as collateral for used car loans. So, try to choose a vehicle that is not more than 3 years old and does not have more than 3 previous owners. Make sure to collect insurance and other pertinent documents related to its previous owners before applying for your loan.
6. Choose tenure wisely
Used car loans come with an extended tenure, which can go up to 5 years for eligible individuals. A long tenure obviously brings down the EMIs payable, making the loan affordable. It is primarily the reason why borrowers look for longer tenures. However, it may not be so wise to choose the longest tenure available as it also increases the total interest payable on the loan, making it costlier in the long run. Thus, make sure to compare different loan terms and strike a balance between the interest payable and the EMIs payable to choose wisely.
Once you have suitably selected all the features and facilities of a loan on old car to go with, choose to apply for the advance online. It should be preferable to offline applications as the application process is simple, quick and can be completed from the comfort of one’s home. Also, the number of documents needed under the online application process is reduced.