The demand for pre-owned cars is increasing by the day. This growth is attributed to the availability of good quality and reliable used cars in the market. Besides, pre-owned cars are more affordable than brand new ones.
There are numerous banks and Non-Banking Financial Companies (NBFCs) that offer attractive finance schemes to those looking to make a pre-owned car purchase. Therefore, getting a loan approval is an easy task. However, obtaining the best deal involves extensive research.
Keep the following five tips in mind in order to get the best deal on a used car loan.
1. Negotiate the price of the car
Though this is often overlooked, negotiating the price of the used car is the best way to reduce your borrowing amount. Dealers generally have a huge profit margin in the transaction and hence there is room for negotiation. You may visit numerous dealers and identify the one offering the best rate.
2. Research various lenders
To secure the best terms of the deal, it is important to explore numerous banks and NBFCs. Contact your local financial institution to find out the offered interest rate. Lower the interest rate, lower is the amount to be repaid. Hence, conduct a thorough research and identify the lender offering the best rate of interest.
3. Check the terms of the deal
Though Used Car Loan interest rate remains the most important aspect of a loan, it is also imperative to consider factors such as the borrowing amount, loan tenure, and repayment schemes, besides others. You may also check the fees levied on your loan. Lenders may charge certain fees like prepayment fees, processing fees, and foreclosure fees, among others. Select a lender offering the lowest charges and competitive terms of the loan.
4. Have a good credit score
Lenders check the credit score before approving a loan application. Higher the credit score, greater the ability to repay. Lenders are thereby assured of the repaying ability of the borrower. Not only does a good credit score increase your chances of gaining a loan approval, but also puts you in a position to negotiate a lower interest rate. It is, therefore, important to check your credit score before applying for a loan. You may also check for discrepancies in your credit score and rectify them, if any.
5. Choose a tenure you can afford
Loan tenure refers to the period of time taken to repay the loan. You may opt for a short loan tenure if your financial position allows you to do so. Though a shorter tenure would indicate higher Equated Monthly Installment (EMI), it will help you repay your debt as quickly as possible. Besides, the interest charged on a short tenure is lower as compared to that of an extended term. Remember, borrowing a loan for a higher tenure increases the total cost of the car loan.
Keep these tips in mind to get the best deal on your pre-owned auto loan. After all, doing your due diligence will help you save a significant amount of money.