5 mistakes to avoid before availing a used car loan
Used cars are a big attraction for those wanting to migrate from two-wheelers or those who want to buy a car for regular commute. Cars are now becoming a lifeline for people living in cities. Not everyone can afford a new car and hence used cars are now being sold at a considerably higher rate than ever. Used car loans are a major reason because they help finance cars and make it possible to own one without paying the entire sum at one go.
If you are looking for a used car, and are planning to avail a used car loan, here are 5 common mistakes that you, as a first-time car buyer, should avoid while taking a second hand car loan.
- Not comparing used car loan interest rates – Used car loans are like all other credit products. They come at a price i.e. interest rate. It is in your interest to get the best loan interest rate. For instance, Tata Capital used car loans start at 12.5% only per year. A costlier EMI can hurt you financially. Compare two used car loans at 12.5% and 14%, you will pay Rs 20,000 more in extra interest over the same tenure of 5 years.
- Misconception of low prices – Used car loans are available in all shapes and sizes. Typically, used cars cost cheaper than new cars. However, many used car buyers wrongly think that a used car loan for Rs 1 lakh will not be available. This is a misconception. Used car loans providers like Tata Capital give any loan amount between Rs 1 lakh to Rs 50 lakh. So, if you have spotted a good used car at an affordable price, do not forget to check loan offers on it. Have any questions?
- Thinking used car loans are given for short tenure – A used car loan is very similar to a new car loan. So, the used car tenure is 12 months to 60 months. This means you can get up to 5 years to repay the second-hand car loan. Many people have a myth that used car loans are not given for longer periods of time. Check with used car loan providers and find out how long they will give you to repay. However, the longer the tenure, the higher will be the interest outgo.
- Thinking you are not eligible for used car loans – Did you know that self-employed individuals can also avail second-hand car loan? Yes. Second-hand car loans are not just limited to salaried employees. For instance, Tata Capital gives used car loan to self-employed persons who are the proprietor aged between 21 and 65 years, have a business running for 3 years and income of Rs 2 lakh per annum. There are some other norms like having a telephone or mobile connection, 3 months bank statements etc.
- Taking the second-hand car loan only from a dealer – After you have decided to buy the second- hand car, is the dealer forcing you to take the loan from a particular institution? Do not make that mistake. Why should you not compare loan offers? Just because you are getting the used car under the same roof does not mean it is the best deal for you. If you think you have got a good used car loan offer, check out with NBFCs like Tata Capital.
You should also check your Used Car Loan EMI options and repayment options, while you compare different institutions. An informed decision is often the best and make sure you have all the information available at your fingertips.