Used Car Loan: The Best Way To Finance Your Car

Used car can be counted as one of the best alternatives for someone who has budget constraint but still wishes to own a car. Many teenagers prefer to choose used cars when they are buying for the first time.  It is because these are cheaper than the new cars and fit into cost range. There are different ways of financing a used car but one of the easiest options will be to take a car loan.
 
Once you have decided on which car you should buy there comes the toughest task assuming that you do not have sufficient money to bring home your car and it is not feasible to take the help of your folks and kin for the extra money to finance your car purchasing. Do not lose your hopes. Step into the world of digital space, where you will find numerous options that are ready to offer you used auto loans. They can be banks, credit unions, financial institutions and dealers to name a few. Go through different offers which they are advertising and choose the one which suits to your requirements. Try to find one near to your place or within locality.

Under the aegis of these loans, you can easily derive nearly 80 per cent-85 per cent of the total amount required and the rest of the amount would be paid by you as down payment. If you will pay a larger amount as down payment then it would benefit you, as you will need to pay a lower interest rate. Besides, prior to the loan approval, having a proper knowledge about the price of the car will help in deriving the exact amount required. Moreover, going for a car that suits your budget and requirement, will make it feasible for you to pay back the amount sourced.

While choosing a used car auto loan, it is imperative to check that whether your car is in good shape or not because it is an investment which you are making even if it is an old car. But do not stop your investigations right here and ho ahead to check the credibility of dealer from whom you are buying the car. Sometimes, lending institutions are reluctant in financing car older than five-six years or tend to charge high interest rate. While discussing different terms and conditions of the used car loan, make sure you have covered all the clauses. While purchasing a used car, there are various additional charges which are waiting for you. So, even when you are considering approaching a lender, calculate your all requirements properly. As a result, you will have adequate resource to cover repair, insurance and other costs that you may borne once you got the possession of the car.

Though the used car loan might come at a lesser value due to the low cost of the vehicle, however, it is definitely not a cheap loan. Let’s unveil few things that make it more costly.

The rate of interest associated with used car loans is higher. While one can get a new car loan with interest rates in the vicinity of 12 per cent, the used car loans have higher interest rates and in some cases they can even shoot up to 20 per cent. It significantly makes used car loan more costly.

Another drawback which is associated with used car loans is the amount of loan sanctioned by the lender. In case of a loan for a new car, lenders don’t hesitate in giving loan up to 90 per cent of the car amount and under certain conditions; it can even increase to 100 per cent of the car amount. However, this amount drastically reduces when it comes about used car loan. Such car loan covers only up to 80 per cent- 85 per cent of the total cost of the car, which can drop to 70 per cent also in certain cases.

There are some banks like State Bank of India, which offer loans at on road prices of the car, thus funding the entire burden of the new car. However, this is never the case with used car loan, where road tax, insurance costs, etc., are borne by the owner and thus it significantly increases the upfront amount to be paid.

Similarly, used car loans have relatively shorter repayment tenures than those of new cars. While, it is possible to repay new car loans in 84 months, used car loan might be given for maximum 36 months.