In a nutshell, down payments are not mandatory, and you can still avail a used car loan without the pressure of making one.
However, many people are inclined towards making used car loan down payments as it significantly reduces the amount of loan one needs to borrow. Thus, it is essential to carefully analyse the pros and cons of making a down payment before getting a loan.
Besides, there is no one-size-fits-all solution to the question of how big a down payment you should make. It, however, depends on your credit situation. A down payment could bring significant changes in the used car loan interest rate as well.
Listed below are a few implications of making down payments before taking an auto loan.
Reduction in principal amount of loan
As is obvious, covering a certain proportion of the total price will naturally reduce the loan amount. This can benefit you in the long run, and you may be able to repay your loan quicker. Additionally, a smaller loan will also mean smaller instalments per month.
Higher chances of loan approval
Firstly, down payments affect the interest rates that you are required to pay for your auto loan. Secondly, in case your account does not boast of a good credit score, clearing off a considerable amount of the price of the car via down payment is a good idea. This way, the total amount of loan money will drastically reduce, and the lender can be sure of your repayment.
Additional Read: Different Ways of Financing a Used Car
Quick repayment and hence, a shorter loan tenure
The tenure of the used auto loan also plays a vital role in the monthly EMIs paid by the customer. If you choose to benefit from a loan that is spread over several years, you might have to pay additional charges of interest for the period. However, clearing off a considerable part of the price with down payment lessens the loan amount. Thus, you are not required to pay interest to your lender for extended periods.
Although a down payment is not mandatory, it certainly eases the loan process for you. Your debt will thereby be smaller and will also last for a shorter duration.
If the scope of used car loan eligibility concerns you, Tata capital might be the friend you are seeking. We provide car loans at competitive rates, flexible tenures and with minimal paperwork.
Additional Read: How Tata Capital has Simplified the Process of Buying a Used Car
Going ahead and availing used car loan with or without a down payment is your choice. Whatever you decide, you can trust Tata capital to have your finance needs met. You can also keep track of your finances and monthly instalments via our very own used car loan EMI calculator available on our website.
To know more about our used vehicle loan offerings, log on to our website or give us a call today!