Factors that affect your Used Car Loan EMI
Owning a car is a big dream comes true for most of us. While getting a new car is often out of reach for the majority, used cars help in realizing your vehicle dreams.
Used car finance is offered by banks and other non-banking financial corporations. The total amount availed in used car loans are lower than that of auto loans on brand new cars. However, several factors determine your car loan EMI.
When these factors work in your favour, the EMI gets reduced further. So, as a consumer, it’s essential to be aware of these factors to benefit in the long run.
#1: Credit History
Irrespective of the type of loan you apply for, your credit history plays a significant role in determining the interest of your loan. Higher the CIBIL score (check your free credit score report), better are the chances of you getting a loan. Also, if you have a good credit history, you can bargain with your lender, to reduce your interest rate, thereby lowering your EMI burden.
#2: Your Income
The amount you earn plays a significant role in determining your EMI. If you have a high debt-to-income ratio, then the lender believes that it may become difficult for you to repay the loan in the future. Thereby, you are likely to incur higher interest rates, thus leading to bigger EMIs.
So, make sure that you have a stable job and sufficient income before you apply for a used car loan.
#3: Down Payment
Higher is the amount you pay as down payment; lower is the amount the bank lends to you, thereby lower EMIs. Also, more down payments equate to reduced interest rates. So, try to save a substantial amount of money to be paid as the initial sum before applying for a used car loan.
#4: Loan Tenure
Used car loans are available for up to eight years. Banks charge higher interest for shorter tenures and vice versa.
For instance, if a bank charges 12.75% p.a. for the loan of up to two years, the interest is reduced to 12.25% when the tenure increases to three years. The interest drops to 10.75% when the duration is seven years.
So, does this mean, you should choose a higher tenure? No calculate the total interest paid in both the cases and choose the one that works the cheapest.
#5: The Make and Age of the Car
The car you are buying is considered as the collateral for your loan. The logic behind this is that if you fail to pay back the loan amount, the bank will seize your car and sell it on the market to reclaim the disbursed loan amount.
Therefore, banks look at the model and the age of the car before providing a loan. Any model that has higher resale value or used only for a few years reduces your car loan EMI.
Always consider these factors when availing a used car loan. Make them work in your favour to get the best interest rates and lowered EMIs. Find out the best loan interest rates for you on http://www.antworksmoney.com. Compare various loans and sign up for the right one for you!
