Investing in a second-hand car is a smart choice when you are on a tight budget and want to prioritize savings. While used vehicles are available at relatively lower prices, making a one-time upfront payment can still cause financial strain. Opting for a used car loan with manageable EMIs is way easier on the pocket. However, many people shy away from approaching lenders due to the high interest rates involved.
Let’s reveal a secret at the beginning: Securing the lowest second-hand car loan interest rates is possible, provided you know the right way. At Manba Finance, we asked our loan experts to share actionable tips on landing the most favorable used car loan terms.
What determines the interest rate on a used car loan in India?
Various factors affect used car loan interest rates, but the top five have the most influence.
1. Credit score:
Your credit score directly reflects your creditworthiness. An excellent score of 750+ indicates healthy financial habits, encouraging your lenders to provide preferential loan terms, including the lowest used car loan interest rates. In contrast, a bad credit score makes loan approval challenging. Even if your application is accepted, you may have to bear the brunt of high interest rates.
2. Income:
Lenders consider your employment status when deciding interest rates. You can attract the best second-hand car loan interest rates with a steady job with reputable companies, a profitable business, and a consistent monthly income.
3. Down payment:
If you initially choose to make a higher part payment, lenders will view you as financially stable and likely offer you the used car loan at comparatively lower interest rates.
4. Loan term:
Generally, the longer the loan tenure, the higher the total interest paid, and vice versa. An online used car loan interest rate calculator can help determine a comfortable EMI and repayment period.
5. Car’s status:
Lenders usually seize used cars in a loan default situation. Therefore, they consider their age, model, condition, and market value when fixing interest rates. If the vehicle is from a reputable manufacturer, not too old, and in good condition, they will likely offer it at more affordable interest rates.
What should you do if you have a bad credit score?
If you have a significantly low credit score, consider postponing your used car loan purchase to avoid high interest rates. Instead, spend a few months improving your credit score through various effective strategies.
What are the benefits of a lower second-hand car loan interest rate?
Low interest rates on used car loans have promising financial benefits. With more affordable EMIs, you can prevent the pressure of high monthly payments and reduce the risk of missing or delaying repayment, boosting your credit score. Additionally, you can save up more money by draining less of your income into loan repayment.
How can you improve your chances of getting the lowest used car loan interest rate?
By now, you must have realized that loans do not always mean high interest rates, exorbitant EMIs, and financial strain. With proper information and strategic steps, you can get the best interest rates on second-hand car loans. If you are looking to achieve the same, here’s a workable game plan for you:
- Keep a credit score of 750 and above.
- Make a substantial down payment.
- Opt for the latest second-hand car.
- Use the used car loan interest rate calculator and opt for a suitable (preferably shorter) loan term.
- Shop around and compare multiple loan offers.
- Negotiate better loan terms with the chosen lender.
- Consider a co-signer to strengthen your loan application.
How do you effectively manage repayment of your used car loan?
Even if you secure the lowest used car loan interest rates and have manageable EMIs, directing a part of your monthly income toward loan repayment may initially seem intimidating. After all, an additional expense can be challenging to manage on top of the many existing ones. But with proper planning, you can escape the threat of loan defaults. Plus, let’s not forget that timely loan repayment can enhance your credit score and make you better eligible for more credit products in the future. An easy-to-follow three-step plan can help you get through loan repayment with minimal stress.
- Step 1: Make a well-structured budget, cut unnecessary expenses, and allocate the necessary funds for EMIs.
- Step 2: Automate your payments to avoid missing or delaying EMIs.
- Step 3: Consider pre-payments whenever you have a monetary surplus, such as bonuses, salary hikes, or gift money.
Considering a used car purchase? Apply for a loan with Manba Finance today!
Remember we suggested shopping around and looking for the best lenders? Well, we can take that task off your plate. Manba Finance offers pre-owned car loans at the best second-hand car loan interest rates to any Indian resident between 21-60 years of age with an operative bank account and required documents. With features like an online loan application, 48-hour processing, and potential 100% financing, Manba Finance is a much sought-after NBFC for used car loans. Contact us for more detailed information and fast-track your dream of owning a four-wheeler!
