Owning a car has plenty of benefits in today’s day and age. For one, it makes it easier to travel to work and back home, especially during peak hours. It also provides you the convenience of traveling when you want to travel to another destination. But when it comes to purchasing a car, not many individuals have the funds to opt for a brand new car. In this case, a second hand car has proven to be a more viable option. Supporting this financial decision is the second hand car loan.
If you are applying for this loan, here is what it you need to take into consideration:
As per any other loan, the interest rate is the one factor you need to take into consideration when opting for a car loan. This factor also determines the EMI’s you will need to pay on a monthly basis. As per the banking standards, a car loan for a new car would be around 10 to 15 %. However, with the used car loan, the interest rates differ between 15 to 18%. This is due to the fact that there is a higher risk for used cars over brand new cars. However, this rate can differ depending on the banking institute you are applying to. It also takes into consideration the make and model of the car you are applying for.
The loan amount for a new car and a used car is considerably different. For one, the loan amount for a new car loan can amount to 90% of the value of the car. However, with the used car loan, the loan amount can vary in-between 75 to 85% of the loan. In this case too, the make and the model of the car is taken into consideration. This also depends on the financial institution you are approaching.
A car loan has a duration of 10 years. This normally applies for a brand new car. However, with a used car, the depreciative value of the car is taken into account. Therefore, when you apply for a car loan for a used car, the tenure for the loan will be anywhere between 5 to 8 years. Some banking institutes will also consider the age and condition of the second hand car when calculating the tenure of the loan.
As the car loan comes under the category of secured loan, a collateral must be provided. In this case, the collateral here is the car itself. Depending on the condition, model and state of the car, it will be verified in order to determine it collateral value. At times, add – ons to the car also taken into consideration when calculating the collateral value.