While we all may desire to purchase a brand new vehicle, that’s not always feasible with our budget. Some of us may need to settle for purchasing a used vehicle. When you do so, you’ll need to obtain a second hand car loan.
Benefits of Purchasing a Used/Second Hand Car
One of the biggest benefits that you’ll enjoy from purchasing a second hand or used car is that it’s much cheaper than a new car. This can help to fit a car purchase into your budget without exceeding it. Another great benefit is that your car will not depreciate as quickly as new cars. It’s well-known that cars depreciate the fastest in their first two years of ownership.
Factors When Going For Second Hand Car Finance
The first factor that you’ll need to consider when looking into second hand car loans is your credit score. The higher your credit score, the lower your risk of default is for lenders. If you can increase your credit score by paying off credit cards or removing inaccurate data from your credit report, it’s best to do so prior to applying for your car loan.
Another big factor that goes into your second hand car loan is the age and condition of the vehicle being purchased. Lenders will only offer loans on vehicles that are determined to have value and will maintain that value over the tenure of the loan that you want to take out.
Second Hand Car Loan Eligibility
Most second hand car lenders will allow you to obtain a loan if you have verifiable income to comfortably cover the monthly car payment. The actual loan approval amount, interest rate, and term offerings are going to be highly dependent on your credit score and income level.
How to Apply For a Second-Hand Car Loan?
One thing that you’ll notice when applying for a second hand car loan is that most lenders will only offer up to 85% of the value of the vehicle. This helps to ensure that you don’t go upside down on a car loan. According to Lantern by SoFi, “To say you are upside down on a car loan means that your car is worth less than the remaining amount you owe on the loan.”
It’s best to apply with a few different lenders to determine which lender will provide you with the most favorable financing terms. It’s crucial to realize that the interest rates offered on second hand loans are going to be higher than on traditional auto loans.
Second Hand/Used Car Loan EMI
EMI stands for equated monthly installments. These are the payments that you’ll need to make over the term of the loan. Any potential lender should be able to provide you with the EMI for the vehicle loan that you’re looking into. They should be able to offer you different EMIs depending on the desired term length of your second hand auto loan.
Contrary to what you may think, you don’t always need to go out and purchase a brand-new vehicle. Rather, you can opt for a second hand auto loan that provides you with a fairly new vehicle at an affordable monthly price.