Planning to own a personal car, then you must first try out a used car? It may sound weird, but if you are purchasing the first car of life and do not have enough driving experience, then a used car is the best option. Moreover, it will come at a budget price, and if you are short of money, then you can opt for a used car loan.
Banks and many financial lenders offer the best auto loan rates. All you need to do is compare and find the lowest used car loan rates. Before stepping ahead, it is crucial to know what is a used-car loan and how to calculate it?
What is Used Car Loan
Car loan for a used car is nothing different from a simple loan. The only thing that differs is that the banks offered it on the security of the purchasing vehicle. The amount sanctioned then is then paid in monthly repayments as per the interest rate charged.
The average rate of interest on used-car loan ranges between 6.50% p.a. to 7.50% p.a. So, it is a good practice to compare used car-loan before deciding one.
Unsecured Used Car Loan
An unsecured car loan is generally applicable on cars that are more than 5 to 6 years old, and unlike secured loan bank it is not guaranteed on the value of the car but comes with higher interest rate. So, it is not the right choice for customers looking for the lowest used car loan rates.
Points to Consider Before Applying for Used Car Loan
Well it’s an excellent step to purchase a car, you should consider the pros and cons before applying for the used car loans
Check the Total Amount You Will Be Paying
The amount you borrow from the bank is paid in monthly installments along with interest. So, the priority is to get the best-used car loan rate, which ultimately results in a low amount. Don’t forget that in addition to paying monthly EMI’s, you have to manage the car maintenance cost, fuel charges, so your spendings will increase. Considering this ensure that the car loan repayment easily met else you will be in danger of losing your car to the bank.
Consider a Short Term Loan
A long duration of the loan may seem easy on your EMI’s, but in the long run, you will find that you are paying more to the bank. Choose the short-term loan you can afford. Short-tenure of the loan will derive low-amount.
E.g., if you borrow $1000 for 5 years at 12.00% p.a. it will cost $13,347, and if the same amount is borrowed for 7 years, it will cost $14,828.
Check the Papers and Insurance
You don’t want to go to jail as soon as you purchase the car. Make sure the car you are buying is accidental free. Check the plate registration date, or you can hire a vehicle inspection professional to check the details.
One more thing is that, read the loan terms and conditions carefully and check you are getting the loan on a fixed rate or variable rate. The fixed loan rate will not change until the loan is complete, while the floating rate of interest may go low or high.
A used Car loan may be calculated online on various comparison websites by entering the loan amount, loan period, and interest rate. It will give you the result of totally EMI paid and the amount paid. Keep in mind these points, and you will get the best-used car loan for your vehicle.