Smart Tips to Utilise When Availing a Used Car Loan

Car purchase is one of the top lifestyle aspirations that households carry. Depending on the budget one carries, car purchase involves taking care of multiple aspects like the seller price, the on-road price of the vehicle, the seating capacity, and such other aspects of the vehicle.

Today, one has the option to purchase used cars as well based on his/her requirements. The affordability factor as well as the availability of cars in near-new conditions assists car ownership aspirants with the right vehicle selection.

These factors also combine to spur the expansion of the used car market, bringing to the financial market’s notice the need to finance such purchases as well. This has led to the introduction of used car loans, which assist with the vehicle purchase financing.

Availing a loan for used car purchase is simple and easy today. As these are secured advances, the interest rate applicable to these loans is affordable too. Further, various other features and facilities make managing and repaying used car finance convenient.

One may still prepare for the financing by keeping a few things in mind that should bring loan approval easily. We have brought a handful of tips that can help with financing your used car purchase. Let’s check them out.

Choose a Car Not Older Than 2 Years

Even though financing is available for all used car purchases across makes and models, lenders prefer cars that are not more than two years old for the purpose of financing. It is because these cars have high resale value and also low depreciation rates than older vehicles.

Further, these cars can fetch a high LTV or loan to value ratio as well under your used car loan. You may thus find it easy to maximise financing on these cars than their older versions.

Check for the Accuracy of All Vehicle Documents

When assessing loan applications for used cars, lenders go through the available documents from previous owners in detail. It primarily includes the registration certificate, insurance documents, claim records, engine number, and the chassis number as registered for it initially.

These ensure vehicle legitimacy and also help fetch high financing value. It is thus best to check these documents for accuracy and submit to the lender when making vehicle purchase.

Assess Your Maximum Loan Affordability

You must also check how much loan amount you can afford based on your income and existing fixed liabilities. It not only helps with easy loan management in the future but also keeps you on top of your creditworthiness as the lender can confirm that the EMIs payable would be within your financing limits without straining your income.

Use a used car loan EMI calculator to check how much EMI matches your affordability and choose a loan amount and tenure for repayment accordingly.

Apply for a Used Car Loan Amount Lower Than Your Maximum Affordability

Your second hand car loan comes with its maximum eligibility as well based on your borrowing factors, which remain within the maximum loan cap. You can check your maximum loan availability with the help of an eligibility calculator available online for free.

Now, even though you might hold eligibility for a high loan value, it is ideal to apply for financing under this limit. This keeps your income significantly free from getting packed with high fixed liability and lands in the good books of your lender.

Compare Lending Institutions for Available Features and Facilities

When checking who to avail the loan from, you must go through an in-depth market research regarding the lender to avail financing with. The available used car finance rates are the top factor to compare available lending institutions for.

The total financing value available as loan, repayment tenure, prepayment options, and the likes are other comparison parameters that you should consider when deciding on the lender. Further, keep a check on the time taken for loan approval and disbursal to find a lender that provides quick funding, preferably within a day or two of approval.

Provide All Income Documents During Paperwork

Once you have applied for the loan with your selected lender and are initiating paperwork, it can be in your favour to provide all income documents during paperwork.

This allows a representation of the actual monthly income that you earn instead of just the primary income, thus increasing your chances of easy approval of the loan amount needed due to a high repayment capacity.

Make a High Down Payment

One useful way to secure a suitable loan value easily is to make a higher down payment than asked for by the lender. Doing so automatically brings down the LTV of your loan, thus enabling easy securing of low-interest second hand car loan.

As for your credit score, even though a lender may not require a mandatory minimum threshold, it is ideal that you check your score and work on it to bring it to 700. This not only helps with quick and easy approval of your used car loan but also helps secure favourable terms on the advance.